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Leverage your mistakes to create value

Kishore Singh  |  New Delhi 

The smart thing to do is to bring mobility into your collection and liquidity into the market.

If you’re invested in art — even if only as a collector — experts now say you need to both sell and buy more in this period of gloom if you want to leverage the market. If that sounds paradoxical at a time when everyone has been advising caution and is probably telling you to lie low, remember there are sound reasons to utilise this opportunity to improve your collateral without losing any money (presuming, of course, that your valuations are already down).

Here’s why.
One: Because everyone makes mistakes with their early buys, with or without the help of experts, you are bound to have some mediocre quality artworks in your collection that are probably now just an embarrassment. Several collectors have told me that they like to hold on to these follies to remind them of how easily they were fooled, or led astray, or succumbed to their flawed judgement. The truth is that if they could have, they would have offloaded these, but their peer group probably consisted of people who know at least as much about good art as you now do.

The answer might be to tuck these mistakes away on a staircase wall and hope nobody will notice, or stash them away in the basement. Yet, that’s an emotional rather than a rational thing to do. The reason is that you probably paid a reasonable amount of money for these works. And you couldn’t do better than get rid of them at this time when people are looking for cheaper works of art. Chances are that you will have paid less than even the current low valuation (no one typically starts by spending a crore of rupees on a painting; more likely a couple of lakhs), so you might not even lose money in the bargain.

But even if you do, it still isn’t a bad deal: You rid yourself of something you probably no longer like, and recognise that it was a poor choice but — and this is reason number Two — you now have the liquidity to buy something else in lieu of the resold works. This is a chance to improve the overall quality of your collection, you get to buy when valuations are low and works are therefore affordable, and you probably get the pick of the crop at that price point.

Experts suggest that you needn’t replace an artist’s works with other works by the same artist — better quality works will definitely be more expensive than what you have realised — so it’s best to diversify with a newer/younger/lesser-valued artist or artists. In fact, you might do best if for every painting you resell in the market, you buy two or more works, making you feel the better for the bargain.

Three: The art fraternity is currently licking its wounds (metaphorically speaking). It needs help and sustenance which can only come about with volatility, which will normally result from a strengthening of prices. But the more people engage in selling and buying, the more a sense of movement and visibility, the more the chances are of a faster recovery, even within the tight ambit of pressured prices. Any activity in the market is bound to boost the morale of artists, of gallerists, even perhaps framers, or insurers. It will bring in a money supply chain that could turn into a critical lifeline for the still fledgling industry.

Which brings me to point number four. You might opt to leverage the market for your own benefit, but it will also earn you the goodwill of gallerists and artists who will remember it in the long term. When the good times come around again, as inevitably they will, you will be remembered for your generosity, or at least selflessness. That’s when you can cash it in for better bargains, first right of rejection on rare works in the market, and so on.

Finally, five. If you have the money, irrespective of whether you are or are not a collector, or have earlier works to sell or not, this is the time to buy. Prices have hit rock-bottom and in the case of the moderns have again started to creep up, while the contemporaries are a fraction of what they were. This makes them very attractive, but this is not a state that is going to last. Despite its seesawing, the share market has been on the upward swing. There is a renewed confidence about spending. And just as this is the best time to invest in real estate, this is likely the best time to invest in art.

Worldwide, expectations of prices of Indian art rising remain buoyant (the usual reasons being limited availability of quality works, a subdued price model when compared with China, growing international recognition, the conversion of a huge, young population consuming aspirational things, including art, et cetera), so the bets on prices rising steeply (if not unreasonably, though in quality works this will be higher, creating a sharp skew within the price band of even the same artist) sooner rather than later cannot be ruled out.

In this scenario, your art portfolio, if it is strong, could once again better the market. It already has a track record on that score.

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First Published: Wed, July 22 2009. 00:07 IST