Making a comeback
According to Knight Frank's The Wealth Report 2015, "it is always possible to commission a new yacht, but nobody can paint another Monet or build a classic Ferrari"
"Gold has lost its lustre. That's the conclusion global asset managers are making as condominiums and contemporary art emerge as more attractive investments" - as reported in The Times of India.
According to Knight Frank's The Wealth Report 2015, there has been a 3 per cent rise in ultra-high-net-worth-individuals (UHNWIs, those with wealth in excess of $30 million) worldwide, with 42,272 individuals in Asia (60,565 in Europe, 44,922 in North America), of which the Indian distribution is as follows: Mumbai 619, Delhi 157, Bengaluru 75, Chennai, Hyderabad 39, and Ahmedabad 20. With 'art its most popular investment of passion', what does this say about the art market in India, currently centred in New Delhi and Mumbai (in that order)? And what of the 40 most important cities for UHNWIs in which Mumbai figures at 26th spot, Delhi doesn't figure at all, and the top five cities are London, New York, Hong Kong, Singapore, Shanghai?
With art market research suggesting that art appears to be bouncing back with an annual growth of 15 per cent, what does this portend for India? More importantly, is the $1 billion Indian art market (of a total $60 billion, $16 billion of which is made up by China) even aware of it and creating strategies around it? Frank suggests that big spends will involve luxury and its associated brands. Where does art figure in this? Especially as the report suggests that "it is always possible to commission a new yacht, but nobody can paint another Monet or build a classic Ferrari."
Art as an asset class has recovered almost all over the world, and prices have begun to harden in India, though still nascently, allowing for huge opportunity as wealth increases and the rich look for a diverse portfolio that moves beyond property, gold and luxury brands. Not only is art seen as aspirational, it also remains accessible with multiple entry points in different price ranges. Though the market stayed stagnant for longer than had been anticipated, the movement now appears stronger, built on a bedrock of competitive pricing and a demand for provenance and documentation that will stand the test of time.
More interestingly, it brings to question the need for infrastructure not just in the prime UHNWI cities in India but also around the world. Should cities with the world's richest populations develop an infrastructure that will support the growth for Indian art? This becomes especially moot because prices for Indian art are currently seen as low and, with sufficient interest, could become the fad of the global collecting world. If a surge follows, it will return investment on value at a far higher rate than art from more established markets, making it a savvy investment. No wonder banks have started advising clients about art as an asset class that should be considered in the mid-to-long-term range.
As happened in the period from 2002 to 2008, this will heat up the market, but with the wisdom of hindsight, punters can hedge their bets better, not playing hokey with supply and demand as much as on quality. Having had its fingers burnt, previous investors might be cautious, but with a new, emerging class of investors, art makes great capital sense for most for its uniqueness.
The difference, this time, might be in the buying parity for Indian art. With global investors watching the India business story play out under a new government, it might be they - rather than Indian collectors - who will power the market. In which case the best time to buy Indian art, before prices escalate, is now.
Kishore Singh April 25, 2015