How 'Rent Control' Is Ruining Mumbai — In More Ways Than One

Welcome to Mumbai, the city of stark contrasts: modern skyscrapers standing proud next to crumbling century-old buildings that threaten the lives of their occupants. Credit goes to the Bombay Rent Control Act, 1947, the decades-old socialist legislation that makes the financial capital's head hang low.

The legislation was brought in to protect tenants during the post-World War II housing shortage, exacerbated by the partition of India. It has successfully managed to freeze rents at 1940 levels for properties worth lakhs in the market today.

Rent control might sound like a tenant’s dream. Fixed, affordable rent no matter how expensive the market gets. But it creates more problems than it solves. With no major gains, landlords refuse to maintain or upgrade properties, resulting in widespread deterioration.

In a free market, rent is typically determined by the forces of demand and supply, along with the intrinsic value and location of the property. The failure of rent control is not hard to understand. Common sense and basic economics dictate that capping prices while demand remains steady leads to shortages.

In Mumbai, the Rent Control Act has significantly distorted this mechanism by allowing let-out at outdated, artificially low rents that do not reflect current market value, followed by a sharp devaluation of the property. In this distorted rental market, new construction becomes less attractive to developers. Supply stagnates, and tenants may stay locked into unsafe housing simply because of affordability, while new renters are priced out due to constrained supply.

Fast forward to today, the customary practice of pagri is still followed under the Act, allowing tenants to pay a lump-sum amount (pagri) to the landlord to secure tenancy at ultra-low rent for spaces worth lakhs in today’s market, as long as they stay.

Today, the once-boon legislation has become a bane, creating a perfect vicious cycle. Landlords, unable to generate sufficient revenue, neglect maintenance. While tenants pay minimal rent, they argue that maintenance is the landlord’s responsibility. The result is nothing but widespread deterioration of buildings, particularly in Mumbai’s older neighbourhoods. News reports and historical data support this critique, underscoring the systemic failures driving Maharashtra’s housing crisis—a problem with parallels in cities like New York and San Francisco in the US.

The Rent Control Act: A Crumbling Legacy and Well-Intentioned Failure

The Bombay Rent Control Act, which later evolved into the Maharashtra Rent Control Act of 1999, was designed to protect tenants by capping rents and preventing arbitrary evictions in the areas covered under the Act. The Act allowed landlords to set initial rents based on property value under Section 10, but its restrictive provisions on rent adjustments have created a financial chokehold for property owners.

The Rent Control Act’s rigid framework, especially under Section 12, has locked landlords into a cycle of diminishing returns, allowing only a 4% annual rent increase since March 31, 2000. After a 52-year freeze, that increase was hardly significant, rendering rental income insufficient to cover soaring maintenance costs for Mumbai’s ageing structures.

Mumbai’s older areas, especially in South Mumbai and parts of the L ward, encompassing Kurla, Saki Naka, and Powai, are stark examples of the Act-induced pigeon holes, with 101 buildings classified as C1 category (the most dangerous), posing immediate risks to residents.

An increment of rent up to 15% and 25% is allowed for improvements and structural repairs by the landlord. However, under Section 12, these hikes require 70% tenant consent. This threshold is rarely met due to resistance and bureaucratic red tape. As a result, even essential upgrades often remain stalled, with changes deemed impractical.

Section 13 allows adjustments for rising property taxes, yet this is a minor relief against the backdrop of escalating repair expenses. Any attempt to violate the standard frozen rent under the Act is met with penalties of up to three months’ imprisonment or a ₹5,000 fine under Section 10, further deterring landlords.

The Maharashtra Housing and Area Development Authority (MHADA) has also identified 96 cessed buildings in South Mumbai as C1, requiring urgent evacuation. MHADA’s offer of ₹20,000 monthly rent to displaced tenants has become a joke. It affords a shoebox worth of space in the current Mumbai realty market and fails to address the root causes.

The human cost of this neglect is staggering. The National Crime Records Bureau (NCRB) reported 1,830 structural collapses across India in 2015, with 59% involving residential buildings, resulting in 1,885 deaths—five per day. Of these, 1,109 fatalities occurred in residential collapses, averaging three deaths daily.

Mumbai has been particularly hard-hit, with over 100 deaths in both 2005 and 2013 due to structural failures, and the death toll exceeding 50 in six years between 2001 and 2015.

Recent incidents like the collapse of Altaf Manzil exposed the failure to detect illegal alterations during surveys, highlighting the crisis. In another case, a building collapse led to owners being booked for culpable homicide, yet systemic accountability remains elusive. The 2019 Dongri collapse, which killed 13 people, saw the trustees of the building personally held liable by the Court for causing death by negligence.

BMC’s Role: Governance Challenges and Administrative Oversight

Corruption exacerbates the problem. Housing expert Chandrashekhar Prabhu pointed to collusion between builders and officials. Complaints regarding illegal constructions often go unnoticed, but buildings still get taxed, prioritising income over safety concerns.

In May 2024, the BMC identified 188 extremely dangerous and dilapidated buildings in the city, with 27 in the city, 114 in the western suburbs, and 47 in the eastern suburbs. Residents often resist evacuation due to a lack of affordable housing alternatives, and some challenge the C1 categorisation, leading to further delays.

When the BMC tries to fulfil its duty, encroachers often get abusive towards officials and workers, attempting to disrupt their work. Every time BMC officials roll out a demolition drive to tackle illegal structures, locals push back hard, sometimes with outright violence. Officials are under constant threat and often need police protection.

In Powai, a demolition operation led to 61 arrests and two FIRs after locals attacked BMC officials and police. In Versova and Dharavi, heated protests delayed demolition drives, including one targeting a mosque, but the BMC pressed forward with strong police support.

Additionally, the legal framework governing Mumbai’s buildings is a complex web of conflicting provisions. The Maharashtra Rent Control Act intersects with the MMC Act and the Maharashtra Slum Areas (Improvement, Clearance, and Redevelopment) Act, 1971. Slums established before 2000 are protected under SRA laws, limiting the BMC’s ability to demolish unsafe structures, even when they violate safety norms.

The BMC’s authority is also limited in cases involving rent-controlled properties or slums. For instance, Sections 394 and 394A of the MMC Act regulate municipal oversight of buildings but do not supersede the MRCA’s tenant protections or the Slum Act’s redevelopment framework. When buildings are in slums or cessed properties, the BMC must coordinate with the SRA or MHADA, complicating enforcement and increasing jurisdictional constraints.

Things were expected to take a turn in 2023, when a High Court ruling offered hope, allowing redevelopment of C1 category buildings with 51% to 70% tenant consent. This overturned the BMC’s 2018 guidelines requiring unanimous approval or 100% tenant consent for redevelopment. However, implementation remains slow, and BMC officials are often shielded from prosecution due to the need for official sanction, a provision critics argue is widely misused.

Gentrification: A Catalyst for Dilapidation and Displacement

Gentrification in Mumbai, especially in areas like the old Girangaon mill lands and suburbs like Mulund, is worsening the city’s crumbling building crisis. It is a deadly cocktail where flashy new developments rise alongside decaying buildings. With no maintenance on one hand and rising demand for malls, high-rises, and multiplexes on the other, this fuels the push to redevelop—but often ignores the safety of tenants still living in ageing structures.

Mumbai’s crisis finds parallels in New York City, where rent control and stabilisation laws cover approximately 24,020 rent-controlled and 960,600 rent-stabilised apartments. New York follows a maximum base rent system with a maximum allowable rent established for each unit. These laws reduce landlords’ incentives to invest in maintenance, leading to devaluation and neglect of rent-stabilised properties. Landlords, unable to recoup investments, often let buildings deteriorate, mirroring Mumbai’s challenges.

In St. Paul, Minnesota, strict rent control led to a huge drop in housing starts, illustrating how such policies can stifle new construction and exacerbate existing problems. In contrast, Minneapolis, which avoided rent control, saw stable rents despite national increases.

New York’s proposed reform allows landlords to deregulate one unit per year. It aims to encourage maintenance and could serve as a model for Maharashtra.

A Call for Urgent Reform

Maharashtra’s housing crisis is a ticking time bomb. Rent control might seem like it's helping the poor, but it mostly benefits those who inherited their flats, not necessarily those in need. At the same time, newcomers, migrants, and younger generations find themselves excluded, as existing tenants rarely move and fresh housing development stalls.

It creates a kind of modern-day feudal system, where a lucky few hold on to government-protected perks and the rest pay the price. The long-term effect is reduced supply and investment, driving up the cost for every new person in the city.

The Rent Control Act, though introduced as a progressive measure, has outlived its utility. It has created a housing crisis that endangers lives. It is high time the government brings in an amendment to do away with the flaws it has created over time by repealing Sections 10 and 12 of the Act.

Mumbai should take lessons from Tamil Nadu’s approach, allowing redevelopment of unsafe buildings. Another important measure would be to unify the differing approaches taken by various legislations, guidelines, and authorities on regulating the Mumbai real estate market.

The government can also consider allowing alternative measures, like letting landlords decontrol just one unit each year. This could slowly rebalance the system, aligning the interests of tenants, landlords, and developers. It would help rebuild a more functional and fairer rental market.