Bombay Rent Act Draws Flak From All Sides

The controversy surrounding the Bombay Rent Act, which was extended recently by a year and provided for an interim hike of five per cent in rent, has become a legal as well as a political issue.

The Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, which affects nearly three million tenants in the megapolis, had not even spared the former Prime Minister Morarji Desai. Desai was forced to vacate his rented premises in plush south Mumbai area in the early 1990s following completion of his lease period. The rents in the city, ranging from a measly Rs 10 to more than Rs one lakh, paid by workers to executive for over half a million tenements and thousands of old dilapidated buildings as well as plush apartments, was in the eye of the storm when the Supreme Court asked for a new Rent Act to be enacted by April one.

 

However, the Maharashtra government and the tenants secured a respite over the thorny issue with the President giving his assent to a bill extending and amending the act. But the stop-gap bill, which extends the rents to just five per cent of the existing rates in Mumbai, is being criticised by both landlords and the tenants.

While the landlords had decided to challenge the interim bill at the scheduled hearing of the case in apex court on April 17, the tenants were pressurising the government to follow the status quo.

The Supreme Court had observed that new rent law for the metropolis may be designed on lines of model rent law, which provides inflation compensation for rents frozen at 1940 levels and result in rent increases between four and 16 times.

However, Maharashtra housing minister Suresh Jain, said there were compelling reasons why the escalations of rent as structured in the model rent control legislation could not be regarded as a fair and just solution to the problem of acute scarcity of accommodations. The effect of these escalations would increase the burden on protected tenants astronomically and the rent itself would become more than 22 times while if the present burden of property and other taxes which is on the tenants is taken into account, the burden on protected tenants would increase manifold, the minister said.

Although the new bill is under consideration of the joint select committee of both Houses of state legislatures in view of the apex court judgement, it is imperative that the rent control and protection against eviction should continue in a just and fair manner, otherwise there will be enormous social unrest, strife and disruption, Jain said.

The Congress leader and MP, Murli Deora, who championed the cause of tenants while defeating the rival BJP candidate, said that rent act has to be amended but at the same time it should protect the rights of tenants.

However, Deora said his party supported the BJP-Shiv Sena alliance on the amended bill extending the rent to five per cent. But whatever be the reasons both the parties are wary of amending the act even though they believe the present act is outdated.

The Act was promulgated in 1948 to keep profit arising out of property in parity with available interest with that of secure investment like gilt edged security.It froze the pre-1940 rent as standard rent beyond which it cannot be enhanced. The act also prohibited eviction of tenants except under certain circumstance. For new construction returns were allowed at six per cent on cost of land and seven and a half per cent on cost of construction which was frozen for all times to come.

Even the permissible increases which were allowed in case of increase in certain taxes or heavy repairs did not cover such costs fully thus in effect reducing the returns. Even these returns got further depleted due to erosion of value of rupee and inflation. As such rented premises came to be a liability and lost their value as asset, a city architect said.