Defining the reasonable

Despitethe impression that the 3 million tenants of Mumbai — a full third of the population of Greater Mumbai — will be thrown onto the streets’, the revised law only seeks to remove the archaic freeze on rents. It seeks to provide a reasonable return to the landlord, most of whom bought apartments or erected their own out of their savings and were penalised for providing accommodation to those who could not afford to purchase their own.

Despite the caricaturisation of landlords as a rapacious bunch, the boot is on the other foot. It barely needs repetition that the bulk of owners have been ruthlessly exploited by tenants, many of whom have become wealthy thanks to the subsidised accommodation they have enjoyed for five decades.

The Maharashtra Law Commission in 1979 clarified that three out of every four landlords in the city were of very modest means and depended on rents for their livelihood. The case of Marine Drive flats, probably all around 2,500 sq ft but earning the owners a pittance of Rs 250 amonth, is symptomatic of this injustice. Even the lowliest of chawls, built to entice workers to the textile mills, have a market rent perhaps 150 times greater today, and many tenants have in fact illegally sub-let their tenements for such sums. As for the pugri system, the very fact that rents are pegged at 1947 rates dictates that only a tiny minority will ask for such payment and in any event, pockets two-thirds of this illegal compensation.

Although it is not clear what the maximum hike in rents is likely to be once the amended Act comes into force, there is speculation about a 16-fold increase at most. This would yield the typical Marine Drive owner the princely sum of Rs 4,000 a month — probably 16 times less than the market rent in the area today! What is more, contrary to the disinformation being spread, the Bill does not make occupants of residential premises any less secure. It does remove some of the protection afforded to occupants of commercial premises: in particular, their right to pass onoffices or shops to their descendants. Every city has been confronted with the ignominy of well-heeled traders who hold their impecunious owners to ransom.

It was this segment which has rallied against the Delhi Bill and forced its postponement.

Privately, all tenants’ associations concede that the case for raising rents is strong. The only issue is: what can be considered a reasonable’ increase? Any arbitrary hike, without any reference to the capacity to pay the tenant or, indeed, the ability to bear of the landlord, will prove capricious. The tenants’ lobby has obfuscated the issue by lumping all tenants together and branding them the aggrieved party, while the landlords are the offenders. The real need is to differentiate between occupants and grant maximum security with minimal rent to the neediest, which alters as the occupant becomes increasingly well-to-do. Thus, all tenants in one-room tenements, who form a large number of the total in Mumbai, ought to be asked to increase their rentsmarginally after a sizable raise initially and given the strongest tenure. On the other hand, those who have illegally sub-let such premises ought to be severely penalised.

The Maharashtra Government itself, which has always bent backwards to protect tenants, seems to have recognised the need to distinguish between them, judging by the fact that it has asked the Supreme Court to exempt apartments below 500 sq ft from the amended law. Tenancies can be differentiated on several counts, of which size is the most important.

Although the lobbyists are quick to argue that such distinction will be judged as discriminatory in law, the truth is to the contrary. The area of a flat is already the basis for some civic taxes and there is no reason why it cannot apply to a new rent law. Why on earth should someone occupying 1,200 or 1,500 sq ft or more in Mumbai seek shelter behind rent control?

At the very least, rent on such premises ought to be raised substantially and if the landlord needs the premises for hispersonal needs, it ought to be relatively easier for him to recover the flat. By setting up a Small Causes Court in the suburbs a few years ago, the government has indicated that it is aware that justice delayed in property disputes is justice denied. Such courts could also look at the capacity of the tenant to pay.

Thus, when the tenant is a company, rather than an individual, it should have very little protection. The Delhi Bill acknowledged this when it laid down that companies with a turnover exceeding Re 1 crore ought to be out of the purview of rent control altogether. As this turnover rises, in the case of multi-crore companies and multinationals, it is obvious that there is no hardship’ if an occupant has to be evicted when the owner requires the property for his genuine needs. These apartments should be negotiated purely on demand and supply. Once rents are raised reasonably across the board, it will do three things. It will enable the owners to undertake repairs. When rateable values rise, thiswill fill the coffers of the Municipal Corporation. Finally, it should once again be possible to find To Let’ signs in the city for all those thousands who cannot find the means to purchase flats themselves. This is an opportunity that every state government, which is entitled to adopt the model rent control Bill, should not pass over for some ephemeral political mileage.

The writer is a former Resident Editor of The Times of India, Mumbai