Mumbai is denying the luxury of buying a new property by having exorbitantly priced real estate. Most of the population living in Mumbai either live of houses that have been bought well before the prices went sky high or are living under rent or the Pagadi system. The Pagadi system is an ancient system of rent followed in Mumbai from the time of the 2nd World War. It is very much similar to the rent system prevailing globally but the only difference is that the tenant also becomes a part owner of the land!
The system protects the tenant more than the traditional renting system does. The landlord will not be able to evict the residents easily and the tenant is entitled to sell the house! The tenant is entitled to the house but not the land. The house can be sold to a new tenant for a percent of the capital value and a percentage of the money made goes to the tenant while the majority is given back to the owner. The tenant pays a nominal amount as rent to the land owner! Banks do not support this system of renting or buying a house, understandably!
This system causes a lot of legal issues especially for the landlord who has to go through a long, painfully cumbersome process should he choose to evict a tenant. Also, the Rent Control Act had protected the tenants who pay a fixed rent and also their right to the property rented by the Pagadi system is passed on through inheritance!
However, the Maharashtra state government has now decided that it will no longer include residential properties smaller than 500 sq ft and commercial properties smaller than 800 sq ft under the Rent Control Act. This will directly affect the Pagadi residents of Mumbai who have been residing for years now in the rented houses! Nariman Point and Marine Drive, two of the most costly real estate spots in Mumbai are dotted with Pagadi properties. It is estimated that a total of 52,000 people still live under Pagadi!
This comes in as a good news for landlords who will now have the power to enforce rent based on the capital value and taxes. It will also empower the landlords to move people out if they are not able to pay the property taxes that the government is looking to levy.
Though in a sense it seems that the unfair balance against the landlords have come to an end, it has to be noted that many of these Pagadi residents have also paid huge sums of money to their landlords already and asking them for more would put them in a tight spot. The solution would be for landlords to take the remaining money and register the property in the name of the tenants.
The residents of South Mumbai will be the most affected by the change in the legalities since many properties are under the Pagadi system.