After capital gains, it’s Sebi’s turn to try and regulate art. But the boom continues, says Labonita Ghosh
That Indian art is booming is well known, as is the fact that the art market has slowed down in recent months. Yet prices, especially of the old masters and the rising stars, continue to seek new and higher levels. In addition, a new class of international buyer is also emerging.
The high prices have inevitably attracted the attention of the government, which stepped in last year with a capital gains tax on profits made from the sale of an art work. Last week, the Securities Exchange Board of India (Sebi) passed a diktat saying art funds cannot be set up without obtaining a certificate of registration from it. If any art fund fails to comply, Sebi can take civil or criminal action against the funds or companies. Such funds, according to the Sebi, are “collective investment schemes” as defined under Section 11AA (2) of the Sebi Act, 1992, and only a certified company can launch or sponsor such a collective investment scheme.
The industry is still examining the implications of this. But on the whole, dealers, gallerists and others have welcomed the move, saying it will help “eliminate fraud and bring more credibility to the industry,” where accusations of price manipulation and such are rampant. It will eventually help evolve an independent valuation mechanism, though it is a moot point whether Sebi has the expertise to handle that.
All this comes when there are signs of a revival — of sorts — of the estimated $350 million art market. At an auction organised by Christie’s in Hong Kong recently, 13 world records were broken in one sale, 10 of them by contemporary Indian artists like TV Santhosh, Subodh Gupta and Riyas Komu. As Vinci Chang, head of sales of Asian Contemporary Art at Christie’s, Hong Kong, puts it, “Asian, particularly Indian art, is the hottest things among international collectors right now.”
While global interest is doing the art world a lot of good, it is a double-edged boon. The exacting standards of international buyers in London, New York and Hong Kong have finally brought the much-needed shake-out in art collecting and investment in India. The manic, indiscriminate buying – of both the good and questionable – as seen in the years between 2003 and 2006, has now been replaced with more cautious, informed purchases. This, on the other hand, say watchers, has led to a slowdown in art investment and buying.
According to Sharan Apparao, of Gallery Apparao, “there was too much of supply of certain artists,” while works by others “were being sold poorly at auctions”, driving down prices and driving away potential buyers. “In some ways, this [auction prices influencing the market] was the beginning of the slowdown.”
And slowdown, there has been. Prices of some artworks have dropped by about 20-30 per cent since 2006; while the A-listers still sell well, the rush for second and third-rung artists has dropped drastically. “The frenzied buying of a few years ago has halted,” says Ranjana Steinruecke of Galerie Mirchandani+ Steinrucke. It’s also telling that, two years after art funds were set up, the cumulative corpus stands at Rs250 crores — a mere fraction of what funds abroad handle.
Says Shireen Gandhy of Chemould Gallery, international interest has led to the short-term trader being separated from the serious investor. Adds dealer Ashish Balaram Nagpal: “The international market is on nobody’s side. Earlier anyone, the bored housewife, the part-time painter, could become an artist. Now only the best will make it.” Buyers have also become smart they will not touch anything that is not archived.
V Sanjay Kumar of the Yatra Art Fund refers to this as a “deepening” of the art market, with its estimated Rs2,000-crore turnover. All of this, says artist Chintan Upadhyay, has freed up artists to be more creative. “New genres are opening up and being appreciated,” he says. “But Indian art will rock the international scene only if collectors and investors risks, just as the artists do.”