RENT CONTROL ACTS IN INDIA

A CRITICAL ANALYSIS

By

Nakul Chaturvedi

M.Tech (UDM)

TERI University

According to a U.N. study in 1986 about 42 percent of the urban dwellers around the world
were renters. Hence, the motivation of a rent control is clear and requires a little more
attention. Rent controls were introduced in the early 1900s in the United States and some
other parts of the world to regulate rent increases and tenant eviction during wartime
emergencies.

In India first rent control legislation was introduced immediately after the First World War in
Bombay in 1918 followed by similar legislations in Calcutta in 1920. By the end of the
Second World War almost all the major cities and towns in the countries were covered by
rent control measures. In India rent control laws can be differentiated into three distinct
phases. The pre independence legislations form the First generation laws. The post-
independence legislation that protected tenancy rights forms the second generation laws. The
legislations implemented in the period post the circulation of the Model Rent Control
Legislation, 1992 (‘MRCL’) marked the era of third generation laws on the subject.

Under the Indian Constitution, the provision of housing is a state issue. Thus the enactment
and enforcement of these laws is the responsibility of the individual state.

The common aspects which are covered by almost all rent control acts and legislations are to:

1. To provide tenants with security of tenure preventing the landlord from evicting the
tenant without an order issued by the court, which could not be given except on
certain specified grounds, such as, violation of condition of tenancy, subletting,
requirement of the building by the owner for his own purpose, deterioration in the
condition of the building, delay or in payment of rent for a specified period.

2. To prevent landlords from increasing the rent above the standard rate permitted by
these laws.

Also, there are certain exemptions being granted to the various sections of the Rental
Housing Market under the rent Control Acts:

 Properties owned by the Government

  Newly constructed properties for the period of ten years from the date of construction.
This duration may vary from state to state.

 Any premise whose monthly rent exceeds three thousand and five hundred rupees (in
Delhi). The amount may vary from state to state.

But it is noticed that as housing is a state subject implementing these Rent Control Laws
uniformly throughout the whole country has been a big issue as every state has its own
Legislation. Hence, the Central Government may guide the states but the power of
implementation and reforming of these laws is left to the individual states. So to overcome
this situation, the Ministry of Urban Development had prepared a Model Rent Control
Legislation on the basis of series of consultations with State Governments and various
experts in 1992.

According to the MRCL overview, in 1992, rent control laws were to become applicable to
towns which had a population above three lakhs as per 1991 Census. MRCL provides that
Standard Rent is to be determined on the basis of 10 per cent or such percentage return as the
State Government may decide on total cost consisting of two components viz., the market
price of land in the year of commencement of construction, enhanced in the manner specified
in (b) below, and the cost of construction, plus, where applicable, the cost of renovations or
major repairs. The MRCL recommends that landlords be heavily penalized for not occupying
or for again letting out the premises within three years of getting possession on the basis of
bona fide need. In light of this, the Maharashtra Rent Control Act, 1999 has declared this
action to be a cognizable offense punishable with imprisonment or fine or both. The MRCL
provides for better care and repair of houses by including maintenance cost as part of
payables by the tenant, thus making it feasible for the landlord to carry out repairs. The
landlord can apply for a revision of rent on account of expenditure on special repairs to the
house.

Despite the circulation of a Model Rent Control Law among all the states by the central
government in 1992, nothing of note has been done with regard to reforming the existing
laws. Essential rights like the right to receipt of payment of rent are not provided for in all the
acts. Provision like these should be standardized across all states. And in many states, no
increase in rent is allowed except when improvements or modifications are made to the
premises by the landlord with the consent of the tenants.

CONCLUSIONS

Rent Control Laws were initially introduced as welfare mechanisms to solve the housing
issues across the country but it is noted that these laws have created more problems than they
have solved. The Model Rent Legislation that was to be the foundation of reform of state
laws, was taken up, although partly, in only four states. It has been accepted by the Law
Commission of India in its 129th Report that the maximum number of disputes pending
before the courts is those relating to eviction.

Nevertheless, the MRCL was, in effect, adopted by just four states JNNURM identified the
major provisions of rent laws that needed amendment. Firstly, control of rents: Under most
rent laws, rent is fixed at much below the market or economic rent and there is no provision
for its revision over time. Secondly, obligations of landlords and tenants: The landlord is
obliged under the law to keep the premises in safe condition and pay all taxes pertaining to
the property. The renter is obliged to pay rent on time, but has no obligation regarding even
day-to-day maintenance. Thirdly, repossession of the premises by the landlord is permissible
only on grounds specified in the law. Main grounds include non-payment of rent, misuse or
non-utilization of the premises, requirement of the premises by the landlord for repair or for
self-use, non-requirement of the premises by the tenant, and sub-letting of the premises
without the permission of the landlord. Fourthly, the long judicial process, at times extending
over ten to twenty years, denies quick repossession of the property to the landlord. Tenancy
rights are inheritable under most state (rent) laws. Therefore, once a house is let, getting
repossession is nearly impossible.

Also a continuous decline in the municipal revenues has been observed because of these
laws. As a property tax is directly linked to the rent and is calculated on the basis of standard
rent rather than the market rent which is generally set lower than the market rent. Also
implementation of these rent laws involves substantial administrative costs for setting up
offices for property registrations, rent fixation and dispute resolutions.

Major rent control laws are often found contradictory to other laws of the land in some
situations as in Transfer of Property Act, 1882 where action of eviction of a tenant can be
initiated at the expiry of the notice of eviction but where rent control laws apply such eviction
cannot proceed unless the landlord can prove the violation of one of the grounds of eviction
under the rent act.

Hence, instead of complete deregulation of the current rent control laws step wise reforming
of these laws is suggested to bring uniformity in their implementation throughout the country.