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Collecting art and vintage jewellery is no child’s play but wealthy Indians don’t mind

When the pandemic derailed many investment avenues, ultra-rich Indians acquired art. Here’s a closer look at what’s involved, if you’re planning to acquire an expensive piece, especially overseas.

September 22, 2022 / 06:23 PM IST

Lost jewellery that once belonged to Elvis Presley could be yours. So could his 1968 “comeback” guitar, which is currently up for bidding at $500,000 in a US auction by GWS Auctions.

Sotheby’s recently invited guests to behold masterpieces by SH Raza and MF Husain, where the opening bids will be called from $150,000-$540,000 (Rs 1.5-4.21 crore) during their London auction, scheduled for October 2022. Separately, stunning artworks by Japanese artist Takashi Murakami are being auctioned by Pundole Art Gallery.

For those who don’t fancy art, rare jewellery is an option. Indeed, apart from art and jewellery, auctions are regularly held in more than 70 categories, including artefacts, wines, celebrity memorabilia and even rare sneakers.

“Young Indian investors are taking a fancy for investing in artworks and collectibles abroad. However, the Indian audience is not mature and they have only heard a few names like van Gogh and Pablo Picasso,” says Ajay Sheth, chief mentor of Conferro Heritae, a firm that curates Indian art and helps collectors collect art.

Apart from financial investments, which don’t particularly make for an interesting conversation at dinner parties, rich Indians have been collecting art and talking about it over a glass of wine or champagne. Little wonder then that Asian auctions during the spring series in 2021 have garnered $496million for Sotheby’s.

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When the pandemic derailed many investment avenues and reduced regular expenses, ultra-rich Indians acquired art. “Acquiring art and artefacts has little correlation with other traditional investments. The online module offers bidders the opportunity to bid from the comfort of their homes,” says Siddanth Shetty, vice president – business strategy and operations, at art auction house AstaGuru.

Also read: Buying gold jewellery has become easier with hallmarking rules

Why alternate assets?

These rare collectibles help investors diversify their portfolio into assets that are agnostic to stock markets and interest rate cycles. While the risk is high, there is also a potential for high returns, if you pick up the right piece.

“One should invest time and understand the artist and the art first. Gain knowledge about the artist and the artwork and only then decide whether or not you would like to make a purchase,” says Shanavas Padmanabhan, Deputy Director and Business & Operations Manager at Sotheby’s India.

Going by only renowned names won’t work as artists evolve over time and the ups and downs of life reflect in their artwork, fetching higher sums for a painting or a sculpture during their later years.

Phenomenal returns?

Piyush Nagda, a senior wealth manager, who is also an avid art collector, spoke to Moneycontrol about his art collection. He described a masterpiece by Sri Lankan artist Senaka Senanayake that adorned a wall in his home, along with art by Seema Kohli, an Indian artist. “Apart from garnering 200% returns (over seven years), we could enjoy the investment as long as we held it,” says Nagda, who has been dabbling in these investments since 2007.

Tyeb Mehta’s Figure with bird (oil on canvas) garnered Rs 24.27 crore at another auction.

Also read: Explained: After Bitcoin and other cryptos, now comes NFT

How to invest

You have to access works of art through auction houses and galleries or wealth management firms. The initial investment could be high.

For instance, Mongolian Gilt-Bronze figurines dating back to the 17th Century and Chinese jade discs and animal figures will feature in Christie’s New York auction, where the bidding will start in a week at $24,000 (Rs 18.72 lakh).

Determining the estimate and reserve price of a collectible involves many parameters. “The art piece’s condition, the year in which it was made, its medium, as well as the artist's importance and reputation; all these must be considered,” says Shetty.

Often art works and jewellery pieces are auctioned as a basket of products or a lot, which could contain, say, a Bhupendra Kakkar painting, along with Michael Jackson’s Bill Whitten gloves and a few jewellery pieces adorned by celebrities. But acquiring a lot partially is not permitted.

“Different paintings of a series of works are also positioned in separate lots. If someone is looking to acquire different works from a series, they will have to bid separately on all the relevant lots,” says Shetty.

This could escalate your investment threshold and the overall budget to acquire a series of paintings.

Jewellers in India, too, are selling rare jewellery under a separate banner. “We have clients buying rare jewels. Imported or Indian origin pieces both sell. Authentic choices are still in short supply. Our ‘Estate Collection’, which comprises pre-independence pieces, carries a higher than intrinsic value due to its provenance, style and history,” says C Vinod Hayagriv, managing director, C Krishniah Chetty Group Of Jewellers.

Be ready for challenges

Being a non-traditional form of investment, Indians need to first bid, then remit the funds abroad and collect the artwork from an international port if auction house assistance isn’t available.

“When you file the remittance forms with banks, there is no classification for Art, even though shares and property are mentioned as a category. Institutions and regulators need to take action to make it less cumbersome to own an art piece,” says another art collector residing in Noida.

Your troubles don’t end there. Customs clearance isn’t a breeze due to conflicts about the valuation of an artwork. “Often the customs officers are curious whether there has been any under-reporting (of prices) on which you have to pay customs duty. They also check if the invoices are valid as many find it hard to believe that a painting or an artwork could be worth crores,” says Sheth, who has assisted more than 200 art investors.

Recently, at Delhi airport, a collector was asked to source a letter from the artist to certify the painting’s price. And the fact that it was sold to this buyer. Unfortunately, the artist was deceased. The painting lay there awaiting clearance for months together; it was finally cleared after three months.

Pick up your art on time or else…

Your expenditure doesn’t come to an end when the hammer comes down on the auction. You’ve got to pick up your prize and get it shipped to your India home, quickly. Auction houses have strict timelines by which you have to claim your prize.

If you get late picking up your artwork, there could be additional charges. “International auction houses could also levy storage charges if the artwork is not collected within a specified time. These could range up to 13-20% per annum, charged on a monthly basis, to pay for the storage houses that are specially designed to store precious artwork and also the insurance costs,” says the curator of an art gallery in Mumbai.

Additionally, the Reserve Bank of India (RBI) has rules around remittance. You could be questioned about pending transactions if you do not produce the relevant documents to the bank.

Charges

Not just storage charges, you could incur additional charges to acquire a piece from the destination port while dealing in international art. For instance, someone residing in Allahabad would have to spend on acquiring the piece from Delhi or Mumbai, where these pieces are typically shipped.

Import-related duties, taxes, delivery and any other charges, wherever applicable, will be directly paid by the buyer. All packing, insurance, shipping or handling charges will be borne by the buyer.

Help is at hand with firms that provide art buying assistance, says AstaGuru’s Shetty. “Everything , including sourcing, handling, logistics, and customs related to the artworks is handled by us for Indian investors acquiring international artwork. The invoiced value would include customs and taxation,” he says.

Bear in mind the escalation in prices. “Apart from the hammer price —- the amount you bid for an artwork —- there will be an additional 24% import charge (custom duty and IGST) applicable to fetch the artwork into India. The clearance charges from the port would be additional,” says the spokesperson of the art gallery, who refused to be identified.

You would also have to engage a good clearing agent to help you once the artwork or jewellery is at the port.

Beware of fakes

But these investments aren’t available for public trading and this also means they are unregulated by the RBI, Securities and Exchange Board of India and even globally by most regulators, such as the US Securities and Exchange Commission.

Elvis Presley’s wife Priscilla Presley has stated that she was weary of seeing many fake Elvis artefacts for sale. Hence the sources of these art pieces are of essence.

“Acquiring art is a high-value investment. Therefore, irrespective of geographical location, one must always buy or sell art and artefacts through a reputable platform,” says Shetty, who is putting together an international auction.

Apart from assessing the condition of the paintings, auction houses — though some don’t offer a provenance certificate — check an art piece’s legacy through publishing records in books and exhibition catalogues and reputed art history experts. A reputed auction house takes care of the authenticity. Experts say that the invoice you get from them is proof enough that the painting’s legacy has been verified.

Sheth of Conferro Heritae suggests that you should seek a guarantee that if the artwork happens to be a fake, then the art dealer or auction house would reimburse the money to the investor as the legal process would take long since the work has changed many hands.

Figuring out storage

Acquiring a piece isn’t the only challenge. Being large-format investments, these works need to be handled and stored appropriately. And that doesn’t just mean in the intermittent period between the time you win it at a foreign auction and get it transported to India.

You need to take care of your art once you get it home. “We can’t ask our regular maid to clean the painting. Being in a coastal region, we also have to protect it from fungi build up as any kind of speck or damage would affect the returns,” says Nagda, talking about the Women in Paradise painting of Senanayake that adorned his wall.

The essence is in its preservation. “To avoid fermentation, you should store the pieces in air-conditioned rooms. In coastal areas, collectors would also need to install de-humidifiers to avoid damage to the art pieces,” says Sheth, who has held the largest collection of newspapers, in multiple languages, for the past 40 years. He also has Bollywood memorabilia, among other things.
Khyati Dharamsi is covering personal finance for the past 15 years. Taxation, insurance, mutual funds and gold are her areas of focus.
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