The End of Rent Control in Maharashtra

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The Dire Consequences of the Draft Housing Policy on Pugree Tenants

Action Committee for the Protection of Tenant’s Rights
Email: pugreetenants@gmail.com ; Facebook: https://goo.gl/K8wkrG

The End of Rent Control in Maharashtra

The Draft Housing Policy of the Maharashtra Government states that the Government has decided to amend the Maharashtra Rent Control Act, 1999 and dis-house lakhs of residential and commercial tenants. If you are a tenant occupying (a) commercial premises admeasuring over 46.5 sq. metres or (b) residential premises over 80 sq. metres you will be excluded from rent control and will have to pay market rents as per the principles in the Ready Reckoner issued for Stamp Duty purposes. Since the vast majority of tenants cannot afford these rents, they will be thrown out on the streets.

WHEN WILL THIS HAPPEN?

  • In the next three months.
  • Necessary amendments to the Act will be introduced in the Legislative Assembly in the monsoon session.
  • Given the majority that the Government enjoys, this proposal will certainly become law.

WHY DOES THE GOVERNMENT SAY THEY ARE DOING THIS?

  • The stated reason is that landlords have no incentive to maintain buildings and this leads to dilapidation. However, this does not make sense when looked into.
  • In fact, tenants of cessed buildings are already paying repair cess and the Repair Board is in charge of maintaining cessed buildings. The statement of objects and reasons of Maharashtra Act No. VIII of 1998, which extended the provisions of the old Rent Act for a year, states:

“In Mumbai itself lakhs of tenants are cessed under the Maharashtra Housing and Area Development Act, 1976 (MHADA Act, 1976). MHADA Act, which has been enacted under an umbrella of protection under Article 39(b) of the Constitution of India provides for a scheme of occupation / ownership as the correct and preferred solution for maintenance and preservation of old building.”

  • For non-cessed buildings the Government can easily introduce laws, which enable tenants to repair buildings themselves, instead of throwing out the tenants wholesale. Clearly, this is reason is untenable.

WHO WILL BENEFIT?

  • A small group of landlords who own these premises will make a windfall profits running into lakhs of crores. The statement of objects and reasons of Maharashtra Act No. VIII of 1998 states:

“It is also pertinent to note that the landlords as a class have made enormous gains because a substantial number of tenancies have been transferred at a premium or “Pugree” and also by utilizing extra floor space index, by change of user of the tenements and by sale of development rights. Many landlords have benefited many times over their original investments. … Substantial parts of land are given on leasehold by public or local authorities to the landowners for long periods of time at very low rents. Escalating land prices in computing the escalation of standard rent could not be either just or reasonable and would unjustly enrich the landlords as a class.”

This amendment will further massively enrich a class who the Government has acknowledged to have already benefited substantially through many ways, including public land granted at highly concessional rates.

  • This amendment would be the first step on the road to the end of rent control altogether – not just for those affected by the amendment, but for all protected tenants in Mumbai and Maharashtra.
  • The amendment picks 46.5 and 80 sq. metres as the limits for rent control – limits that have been chosen at random. Tenants, who have historically been a class, are sought to be divided as also landlords as a class are sought to be divided.
  • Tomorrow, the Government may at random lower the limits further – dis-housing more and more tenants in the process.
  • The amendment refers to a cap on the rent payable after the fourth year of 30% of the income of the tenant. However, if a tenant cannot afford 50% of the market rent for the first three years he will be dis-housed in any case!

·         Regardless in these days of constant inflation, nobody can afford to pay 30% of his/her income for rent!

  • The amendment will also undermine the defense of the Government and the tenants in the Constitutional challenge to the Rent Act by the powerful Property Owners Association which is pending before a nine judge bench of the Supreme Court.

·         The amendment will also remove tenanted buildings from the MHADA Act, which would permanently take away your right to acquire your premises from your landlord under that Act, on payment of a compensation of 100 months rent. This is one more illegitimate largesse sought to be given to a select group of landlords.

  • The amendment states that landlords will be responsible for maintaining buildings and that failure to do so will attract penal provisions for negligence under the Indian Penal Code. The provisions for negligence in the Penal Code relate to causing death. Small consolation for a tenant who has been forced to pay market rent only to have his building collapse on his head!

WHAT OUR MINISTER AND LEGISLATORS ARE SAYING:

  • In an Economic Times article on May 3rd, an anonymous housing department official said that Maharashtra Housing Minister Prakash Mehta “was not kept in the loop while formulating the policy”.
  • Mangal Prabhat Lodha, MLA of the BJP has criticized this move. Raj Purohit, MLA and former Minister of Housing in the state Government has also stated that this proposal in the Draft Housing Policy was without his knowledge and that there has been no discussion about it.
  • It is incredible that the current and former Housing Minister are unaware of a policy that will dis- house lakhs of tenants!

HOW WAS THE DRAFT HOUSING POLICY PREPARED?

  • On 21st and 22nd February 2015 a Seminar on Housing Policy was held in Nagpur. This was attended by the Chief Minister Devendra Fadnavis, Housing Minister Prakash Mehta, Principal Secretary for Housing Satish Gavai, top builders, NGOs, well known individuals in the field of housing and various government officers. After this Yashwantrao Chavan Academy for Development Administration (YASHADA) (which minuted the discussions) prepared and circulated a Report on the Draft Maharashtra State Housing Policy. This was sometime in March.
  • Subsequently a small advisory group was formed, which met a few times and finally on 5th April 2015 YASHADA circulated Version 4 of it’s Report. This version contains no mention of an amendment to the 1999 Rent Act.
  • Then, on 15th April 2015 the State Government circulated the Final Draft Policy in Marathi, in which the paragraph about the amendment to the Rent Act has been added.

·         What happened between 5th and 15th April? Why was this amendment suddenly added? Why were tenant organizations and the group assisting the government to prepare the policy kept in the dark about it? Where is the study/survey/data on which this amendment is based? Why was our Housing Minister kept in the dark about this amendment?

  • Despite this, in a Mid-Day article of 10th May it was reported that the Draft Policy, which will give a huge and unjust windfall to a small group of landlords, is to be submitted before the Cabinet next week where it is “expected to sail through”.
  • In the middle of all this, Housing Secretary Satish Gavai has gone abroad and has been unreachable.

WHAT IS THE CHALLENGE TO THE RENT ACT?

  • In 1996, the Supreme Court ordered the Government to substantially revise standard rents else face a striking down of the rent control. The then SS-BJP Government initially enacted Maharashtra Act No. VIII of 1998, revising rents by only 5% per annum. The statement of objects and reasons of Maharashtra Act No. VIII of 1998 states:

“It is also pertinent to note that the landlords as a class have made enormous gains because a substantial number of tenancies have been transferred at a premium or “Pugree” and also by utilizing extra floor space index, by change of user of the tenements and by sale of development rights. Many landlords have benefited many times over their original investments. … Substantial parts of land are given on leasehold by public or local authorities to the landowners for long periods of time at very low rents. Escalating land prices in computing the escalation of standard rent could not be either just or reasonable and would unjustly enrich the landlords as a class.”

  • In Court, Government advocates forcefully set out that a higher increase was not justified.
  • Ultimately, pursuant to public hearings and a report of an all-party Joint Select Committee of both houses of the State Legislature, the 1999 Act was passed, providing for a 5% increase in rents, which is presently under challenge in the Supreme Court.
  • In many cases, a new class of landlords has purchased tenanted buildings after the passing of the 1999 Act. These have been bought at a fraction of the Ready Reckoner open market prices reflecting the rent protection of the 1999 Act, which was expected to be permanent. This change would unduly benefit this new class of wealthy landlords, who have purchased these properties as investments knowing that they are rent-controlled and at prices which reflected this fact.

WHAT HAS GUJARAT DONE:

  • Gujarat and Maharashtra had the same Bombay Rent Control Act at the time of reorganization of States. The Gujarat Government has not, whether under Chief Minister Shri Narendra Modi or after, excluded any category of tenants in this manner. In spite of this, there has not been any adverse effect on the development of Gujarat.
  • When our Hon’ble Prime Minister believes rent control to be in the interest of development and prosperity, it is strange that the Maharashtra Government would think otherwise.
  • In fact, the statement of objects and reasons of Maharashtra Act No. VIII of 1998 states:

“The whole economy of the Island City of Mumbai developed and prospered because of an economy based on low rents.”

WHAT IS TO BE DONE:

The Action Committee for the Protection of Tenants’ Rights was formed in the 1990s to fight for the reasonable and legitimate interests of tenants protected under the rent law. It comprises of The Federation of Associations of Maharashtra (the apex body of traders), the Federation of Retail Traders Welfare Association, the Trade Unions Joint Action Committee, several tenant organizations, several other groups and individuals working in the field of housing.

The Action Committee will seek an urgent appointment with the Housing Minister and the Chief Minister to request their urgent intervention in the matter. In the meantime, affected tenants should circulate this leaflet widely and also contact their MLAs and ask them to talk to and write to the Government to immediately drop this bizarre and unjust proposal

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