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March 12, 1999


E-Mail this column to a friend Darryl D'Monte

Time running out for tenants

The Maharashtra government appears to have completely capitulated to the vociferous tenant's lobby in Mumbai, which has been trying to thwart the amendment of the rent control legislation in the state. Because tenants far outweigh owners of properties, and politicians of every party realise that they have to lend a sympathetic ear to their constituents, the government has bent over backwards to accommodate this lobby. Its latest capitulation is its appeal to tenants' groups actively to participate in the ongoing case over the Rent Control Act in the Supreme Court. This is no means a peculiarly Mumbai problem: if anything, the situation in Calcutta is worse. Delhi has at least passed its new legislation based on the model rent law.

The tenants, who have been living in subsidised accommodation at the cost of landlords for just over half a century in the commercial capital of the country, have been making out that they are destitute and will be thrown on to the streets if the amendments suggested by the Supreme Court in its verdict in December 1997 are introduced. Nothing could be further from the truth. While the wholesale price index has risen a mind-boggling 66 times over this period, rents have remained virtually frozen in these old tenanted apartments and business premises. Indeed, one is confronted with the all-too-familiar phenomenon of the well-heeled tenant, whose earnings have risen considerably over the years, often being far better off than the unfortunate owner, who made the cardinal mistake of leasing his premises.

According to the Maharashtra Law Commission, which exactly 20 years ago presented its report on this controversial issue, nearly half all landlords in Mumbai belong to the low income group and only 27 per cent to the middle class. If these people invested their hard-earned savings in building or buying an apartment in the forties or earlier and decided for whatever reason not to occupy these themselves, why should they be punished for it? The Supreme Court has noted that if the same funds had simply been invested in a bank, they would have been worth a considerable sum today. In fact, one could argue that landlords had served a public purpose by making their premises available for countless families who could not afford to buy their own. The 1991 Census showed that 420,000 out of a total of 3.6 million tenements are locked up for fear of not recovering them -- this represents 11 per cent of the total!

Even the numbers cited by the tenants' lobby are exaggerated. There are some 20,000 old buildings which are "cessed" and located in the island city. Assuming an average of 20 tenements each, and a typical 6-member family, this gives a total of 2.4 million tenants, out of a total of around 10 million people in Greater Mumbai. The impression that they form the majority of the population is, therefore, quite wrong. Indeed, one should add some 5 million-plus slum and pavement dwellers, who are really the sections that anyone concerned about housing in any city should be worked up about. Many of the spokerspersons for the tenants are in fact small businessmen, who feel they will lose out on the right to inherit commercial premises under the national model rent control law, which Delhi has incorporated in its legislation four years ago.

Instead of conflating all these issues, as the tenants and a pliant state government have been seeking to do, it is high time that a dispassionate view was taken of the problem. When the apex court ordered that there ought to be a fair and reasonable increase in rents, the state government, browbeaten into submission by this lobby, came out with a 5 per cent hike, which will obviously not pass muster when it is reviewed in New Delhi. Under the model legislation, increases have to be permitted based on several variables: the duration of the tenancy, the amount of rent and the size of the apartment being the most significant.

In Mumbai, those who have been examining this issue in some detail have worked out possible increases based on the model law. Under this, the minimum increase permissible will be for residential accommodation under 125 sq metres in area. For the oldest tenements in this category, built before 1940, the rents could rise 19 times. For flats above this size, they could rise 25 times. As far as business premises are concerned, the rises will obviously have to be higher. For those under 65 sq metres, the hike could be 26 times and 35 times for the bigger premises. There is also provision for paying this increase on a staggered basis, so as to minimise any hardship.

Thus, the first need is to identify which tenants are still in need of protection and which are not. Anyone living in Mumbai's archetypal chawls -- one or two-room tenements -- ought to pay the lowest rent and also given the maximum security against eviction. This would apply to all those textile workers who were given such accommodation decades ago, to entice them to come to work in the city. Such accommodation has spawned an entire way of life -- one has only to read Kiran Nagarkar's novel, Ravana & Eddie, to get a feel of this -- and it would not be equitable to expect such residents to pay anywhere near markets rents.

In Parel, in the heart of the mill district, popularly known as "Girangaon," a modest chawl could fetch up to Rs 300,000 when real estate prices were at their highest in the early nineties. At the same time, if the original tenants have leased these out, the owners should expect either to receive nearer market rents or be able to recover the premises.

When apartments are over 125 sq metres, however, there is no reason why the occupants deserve to receive as much protection as a chawl tenant. The case of apartments in Marine Drive are quite typical of these very fortunate residents. Most of these flats are some 2,500 sq ft in area, but the tenants still pay around Rs 250 or so a month. It is because of these frozen rents that the entire old housing stock is dilapidated today. The owner obviously cannot afford to maintain them and the tenants are often unwilling or unable to convince their fellow residents to cooperate to do so. In the cessed buildings, this is a serious hazard, as the collapse of decrepit structures demonstrates, particularly during the monsoons.

As for occupants of commercial premises, who have been at the forefront of the move to stay the implementation of Delhi's rent control legislation, they do not need much protection and should not be able to pass on offices or shops to their next of kin.

The tenants organisations have been agitating for the "right" to buy out their tenements using the old formula: 100 months' rent. This virtually amounts to their appropriation of the property and some more equitable arrangement is required. The well-known architect, Charles Correa, who headed the National Commission on Urbanisation some years ago, has argued that the landlord should receive half the market value of the property, which seems a fair compromise. Housing and banking institutions could come to the aid of tenants who cannot afford to put down such large sums by offering them loans to do so.

The Maharashtra government has rightly recommended that the system of pagdi or payment in cash for occupying old premises should be legalised. What is more, it has suggested that multinationals, public and private companies, banks and any corporation with a paid up capital of Rs 10 million should not be entitled to standard rent. Even these companies are being protected by the same legislation which governs one-room tenements today.

Once such archaic laws are amended, it will raise the rateable values of properties and fetch the city authorities far more by way of property taxes. In a city which till four years ago commanded some of the highest real estate values in the world, it is ludicrous that the municipality only earns some Rs 6 billion by way of such revenue currently. Other cities will be following Mumbai's case keenly.

Darryl D'Monte

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