Earn more than Rs 10 lakh? Pay more rent

If approved, the move will affect hundreds of affluent families in south Mumbai occupying spacious flats for a rent of Rs500-Rs1,000 per month.

In a move likely to stir controversy among rich residents of South Mumbai, the state government is considering to exempt tenancies where occupiers have income of more than Rs10 lakh per year from the provision of the standard rent. This proposed modification to section 6 of the Maharashtra Rent Control Act, 1999 if approved, will affect hundreds of affluent families in South Mumbai occupying spacious flats of 1,500 sq ft for a meagre rent of approximately Rs500-Rs1,000 per month. Standard indicates the rent at which the premises were let on September 1, 1940.

As the Supreme Court is currently hearing a petition on the 1999 Rent Control Act, the proposal will be applicable to new tenancies that would be created.

Housing department officers say the proposed modification in the Rent Control Act is a key element in the strategy to deregulate the housing industry. The concept of standard rent has frozen the rent of all old tenancies and comes in the way of levying economic rents in case of new tenancies as well. As there is neither any return on the original investment or possibility of the repair cost recovery through rental mechanism, the landlord has no incentive to repair the building.

“The property once let out by the owner is practically lost forever,” said a senior housing department official. “The net result of the protection under the Rent Control Act therefore, discourages investment in rental housing while further ensuring that huge housing stock is lying vacant in different parts of the city,” he added.

“The rich can afford to buy a new flat or pay high rents,’’ he said while citing the recent case of a well-known stock broker who in addition to holding his tenanted flat, bought a flat at Malabar Hill for an astounding rate of over Rs55,000 per sq ft. Another example is of industrialist Nusli Wadia who owns the Rs3,000 crore Bombay Dyeing group.

In Wadia’s case, the Bombay High Court protected the Wadia family from being evicted from their Malabar Hill flat following a notice by New India Assurance (NIA). The NIA had wanted to terminate Wadia’s tenancy under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 as it wanted to use the premises for accommodating their senior employees and also because of the fact that Wadia was a ‘rich and wealthy industrialist who has several flats for his residence’.

The fifth-floor 3,000 sq ft flat in Mayfair Gardens, Malabar Hill, is occupied by Wadia’s younger son Jeh, his wife Celina and son Jehangir. The court however, ruled that since Wadia is a genuine tenant, the NIA must first prove that it wants the flat back for legitimate reasons. Incidentally, about a month after the High Court order, the Wadia’s sold their 8,000 sq ft flat in Samudra Mahal at Worli for an astounding Rs31 crore to a diamond merchant.