Reforming Delhi’s rent control regime Renting is an important alternative to ownership of property. According to a study by the United Nations, around 42 per cent of the world’s urban dwellers were renters in 1986. The percentage is likely to be even higher for India, with heavy population densities and low per capita income. Rent Control measures become necessary when demand for rental property far outstrips the supply and renters become vulnerable to exploitation by the landlords. These Rent Control Acts (RCAs), including The Delhi Rent Control Act, 1958, are meant to fulfil two main purposes: protect the tenant from having to pay more than a standard rent, and to protect the tenant from arbitrary eviction. Like most RCAs, the Delhi Act exempts upper bracket housing, whose monthly rent exceeds Rs 5,000, from its purview, and slums, which continue to be governed by the Slum Areas Act, 1956. The main focus of the Delhi Act is, thus, on the regulation of rental spaces for the lower income groups falling within the limits of the Municipal Corporation of Delhi, Delhi Cantonment Board and other specified areas. One of the major concerns of the Delhi Act is to fix the standard rent to prevent overcharging by the landlord. How unrealistic the standard rents are, can be gauged from the fact that the Delhi Act makes a mention of the lowest rental values of Rs 600 as basic rent, which was fixed sometime in 1944 i.e. just before the conclusion of the Second World War! The Act contains a wide range of standard rents fixed at different times under prevailing laws, which are baffling for the reader but hopefully comprehensible to the landlords and the Rent Controller! The permitted increase in the standard rent is 10 per cent every three years. The low rates of return have turned renting almost into a welfare activity for the landlord and act as disincentives to repair and maintain the property, often resulting in building collapse. The quality of housing, therefore, takes a severe beating. Prospective landlords are deterred from entering the rental market, preventing the supply of new stock. The second debilitating effect of RCAs is the difficulty a landlord faces in evicting a tenant. The conditions under which a landlord can evict a tenant are stringent and strictly monitored, and rarely can the landlord extricate the property from the vice-like grip of the rent control regime. The Delhi Act has provisions that allow dependents of the tenant to continue tenancy after his death, making tenancy worse than an indissoluble matrimony for the landlord. Another defect of the regime is the mismatch between a tenant’s ability to pay rent and the type of accommodation available. Municipal revenues get eroded since property tax is calculated on the basis of standard rather than market rent. Rent control measures involve substantial administrative costs due to the elaborate mechanism involved in implementing the Act. The severity and unreasonable nature of the RCAs abet illegality and litigation. The artificial shortage of rental housing, along with the exemptions granted, create a flourishing rental black market. Tenants are emboldened by the law to resort to subletting and making modifications in the buildings without the consent of the owner. Landlords, desperate to get their property vacated, resort to illegal means such as paying reverse ‘pugree’ (an interest free security deposit) to the tenant to induce him to vacate, or seek the help of organised gangs, or the local police for forceful eviction. Several RCAs are products of the World War, which necessitated strict rent control for housing soldiers in available accommodation. They need to evolve into modern creatures which allow for holistic planning and concerted action under relevant laws, to solve the mammoth urban housing problem. There is a need to discard outdated and draconian laws that deter addition to existing stock while presiding over the attrition of the existing one. —The author is former secretary, department ot land indianexpress/news/reforming-delhis-rent-control-regime/1144174/0
Posted on: Sat, 03 Aug 2013 10:49:36 +0000
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