Things You Should Know About the Pagdi System in Mumbai

What is the Pagdi system in Mumbai?

Pagdi is a traditional tenancy rental model in India where the renter is also part-owner of the house (not the land). He enjoys nominal rates compared to the market rates for rent and also has both subletting and selling rights for the property. The practice was legalised in 1999 by Section 56 of the Rent Control Act, stating that the tenant or any party acting on behalf of the landlord can claim or receive any sum or any consideration as per the agreement between him and the tenant. Let’s explore more here.

The Pagdi system in Mumbai ensures that the rent for the property remains nominal despite the rise in inflation or any other market fluctuations. Under the Pagdi system in Mumbai, tenants pay rents as low as Rs. 500 for a property with market rates going as high as Rs. 60,000 or more.

There are many issues related to this rental model, the most prominent one being redevelopment. Once the flats are fully constructed and complete ownership is transferred to the landlord, the builder gathers his profits and leaves. The part ownership levies the burden of maintenance on the tenant and the renters, who are co-owners and manage the housing finance together. Given the nominal rent that the tenants receive, they remain deterred from carrying out any maintenance work for the house, resulting in dishevelled structures all around Mumbai. There have been reports of old properties falling and leading to casualties time and again in Mumbai.

The State Government and the tenants are pushing for amendments in the Maharashtra Rent Control Act of 1999 to ensure properties above 847 square feet and 547 square feet (popular average of the houses under this system) pay rents equivalent to the market rates, almost 200 times the rent paid under this system. This move will ensure these tenants slowly phase out of this archaic system towards a more progressive Model Tenancy Model as proposed by the Central Government. Now that you know what is the Pagdi system in Mumbai, let’s look at its key features and legal framework.

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Key Features and Legal Framework of the Pagdi System

The Pagdi law in India is a unique housing model where tenants get strong, long-term rights over the property. Key features of this system include:

• Lifetime tenancy, where families can continue living in the home for generations.
• Very low monthly rent, since most of the amount is paid upfront.
• The right to transfer or sell occupancy, allowing tenants to earn from their share.
• Limited landlord control, as owners cannot raise rent or evict tenants easily.

The Pagdi system legal framework comes from the Maharashtra Rent Control Act. It protects tenants, restricts rent hikes, and sets clear Pagdi property rules for redevelopment. Builders need tenant approval, and temporary housing must be provided. These strong Pagdi housing features make it a tenant-friendly setup in India.

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Tenant Rights Under the Pagdi System

The Pagdi system tenant rights give occupants long-term security and more control than regular renters. At the same time, basic tenant obligations under the Pagdi rules must be followed. These include paying rent on time and maintaining the property under the Pagdi tenancy rules. 

Here is the high level of tenant protection that Pagdi laws offer:

• Permanent Occupancy: Tenants can stay for life while paying very low monthly rent.
• Subletting Rights: Tenants can rent out the property and earn extra income.
• Inheritance Benefits: Tenancy automatically passes to legal heirs, offering long-term family stability.
• Right to Transfer Occupancy: Tenants can sell their share to someone else, often gaining a good return.

Property Transfer and Inheritance Rules

1. Inheritance Process

Under Pagdi inheritance rights, a tenant’s children or legal heirs automatically step into their place after their passing. This smooth transfer keeps the home within the family and maintains long-standing tenancy as outlined in the Pagdi succession rules.

2. Sale and Transfer Rights

As per Pagdi property transfer rules, tenants are allowed to sell their occupancy rights to someone else. However, the landlord gets the first chance to buy the rights by matching the offer.

3. Redevelopment Scenarios

When a building goes for redevelopment, the transfer of tenancy Pagdi rules let tenants choose between shifting into the new building after completion or taking a financial settlement for giving up their unit.

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Eviction Rules in the Pagdi System

Under the Pagdi eviction rules, landlords cannot remove tenants at will. Eviction is allowed only in a few situations clearly defined under the Pagdi tenancy eviction law.

For example, if a tenant repeatedly fails to pay rent, sublets the home without approval, or uses the property for unlawful activities, the landlord may start the legal eviction process Pagdi requires. But even then, proper notice, documents, and court approval are mandatory.

The law also demands strict compliance with the Maharashtra Rent Control Act, giving tenants protection from sudden removal. Because court cases move slowly, tenant eviction Pagdi cases often take months or even years, giving residents enough time to respond and defend their rights.

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Redevelopment of Pagdi Properties: Processes and Challenges

Pagdi property redevelopment usually begins when tenants come together and agree to rebuild the old structure. A feasibility study is prepared to check the available space, design options, and overall cost.

Once tenants approve, a developer is selected, and a formal agreement is signed by all parties. The project is then registered with MahaRERA for safety and transparency. Tenants move to temporary housing or receive rent support until construction is completed. After rebuilding, they receive new flats with improved facilities.

However, Pagdi redevelopment challenges often slow down progress. For example,

• Some tenants may disagree with the redevelopment process under Pagdi.
• Developer selection may lead to disputes.
• Legal and municipal approvals can delay Pagdi building redevelopment.

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Pros and Cons of the Pagdi System for Tenants and Landlords

The Pagdi system pros and cons differ for tenants and landlords. Here are the key benefits and drawbacks for tenants vs landlords under Pagdi:

Pros (Benefits of Pagdi Housing):

• Affordable Housing: Tenants pay very low rent in prime areas, making it accessible for middle-class families.
• Wealth Building: Occupancy rights can be sold or inherited, creating long-term value for families.
• Compensation on Redevelopment: Tenants often receive significant payouts when properties are modernised or sold.

Cons (Drawbacks of Pagdi System):

• Limited Landlord Income: Owners earn minimal rent for decades, which can be financially challenging.
• Redevelopment Delays: Getting tenant consent for upgrades can take years.
• Legal and Documentation Issues: Many Pagdi properties lack proper records, causing disputes during transfer or inheritance.

RERA

Now that you know what is Pagdi system in Mumbai, let us talk about its inclusion in the RERA Act. The government is actively trying to bring the deceased building controlled by the Pagdi System under the Real Estate Regulation (and Development) Act, 2016 (RERA) and provide protection and rent security to the tenants. The Maharashtra Housing and Area Development Authority, which receives taxes from these properties, has taken the onus to redevelop these structures. Around 16,000 properties in Mumbai are cessed for repairs, including Pagdi properties.

The Mumbai Development Control and Promotion Regulations 2034 (DCPR) provide attractive incentives to the landlords of these buildings to encourage their redevelopment work. These incentives are given based on the total area required to rehabilitate the occupants.

There are other areas in the country, places like Chandni Chowk in Delhi, that still practice this age-old practice that dates to the pre-independence era. Not only does it prevent the landlord from enjoying the benefits of owning the property, but it also demotivates him from taking care of it. If the current protests from the landlords and the government bear any fruit, many such structures will be saved, and any accidents will be prevented from happening.

Conclusion

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