4 Things You Need to Know About Pagdi System in Mumbai

Have you ever come across a Pagdi system house in Mumbai? Odds are that you have, especially if you are looking to rent a house in older areas of Mumbai. In fact, there are over 7.5 lakh homes in Mumbai still that follow the Pagdi system!

For the unaware, the Pagdi system is a unique colonial-era tenancy practice that has prevailed in cities like Mumbai, Delhi, Kolkata, etc., for over a century. In a nutshell, it is a rental law where the tenant pays a ‘pagdi’ to the landlord as a non-refundable deposit. A ’pagdi’ is a lump sum amount that allows tenants to pay a highly discounted rent every month. 

Rather curiously, tenants can also transfer or even sell the property subject to the consent of the landlord and the payment of a transfer fee. The landlord, on the other hand, retains the ownership of the property and cannot evict the tenant unless there is a breach of contract or court order. Over time, the Pagdi system became a customary practice in many parts of Mumbai, especially in the old and congested areas.

Sounds quite interesting, right?

However, renting a Pagdi system house in Mumbai has drawbacks and challenges. Here are four things you need to know about it.

• The Pagdi System is Not Regulated by Any Law

There is no legal definition or recognition of the Pagdi system in any statute or regulation. The rights and obligations of the parties are governed by their mutual agreement and custom. This means that there is no standard procedure or documentation for the Pagdi transactions, and disputes are often resolved by arbitration or litigation.

• The Pagdi System is Vulnerable to Fraud and Exploitation

Since there is no official record or registration of the Pagdi transactions, there is a risk of fraud and forgery by unscrupulous landlords or tenants. For instance, some landlords may claim that they have not received the deposit or the transfer fee from the tenants, or some tenants may sell or sublet the property without informing or paying the landlord. There have also been cases of tenants being harassed or threatened by landlords who want to evict them or increase the rent.

• The Pagdi System is Detrimental to the Development and Redevelopment of Mumbai

The Pagdi system has resulted in a large number of old and dilapidated buildings in Mumbai that are unfit for habitation and pose a danger to public safety. The landlords have no incentive to repair or renovate their buildings, as they do not get any benefit from it. The tenants have no incentive to vacate their flats, as they do not want to lose their deposit and their rights. This has created a deadlock that prevents the redevelopment of many areas in Mumbai that need urgent improvement.

• The Pagdi System is Facing an Uncertain Future

The good news is that the Pagdi system is gradually losing its relevance and appeal in Mumbai, as more and more people prefer to buy their own flats or rent them under the Rent Control Act or other laws that offer more protection and transparency. The government has also been trying to phase out the Pagdi system by introducing various schemes and incentives for landlords and tenants to convert their tenancies into ownership or leasehold rights. However, these efforts have met with resistance and litigation from both sides, who are reluctant to relinquish their existing benefits and privileges.

Conclusion

All in all, the Pagdi system is a complex and controversial phenomenon that reflects the history and culture of Mumbai. It has its advantages and disadvantages, its supporters and critics, and its opportunities and challenges. It is unclear whether it will survive or fade away in the future, but a Pagdi system house in Mumbai is certainly something you need to know about if you are interested in the city’s real estate market.