The government is planning to bring tenanted or cessed buildings and tenants of such buildings under the Real Estate (Regulation & Development) Act, 2016 (RERA),providing for the first time the same protection to these consumers as those available to other home buyers.
The tenanted or cessed buildings that dot the landscape of many cities, especially Mumbai, house people who have been living for several decades and paying cheap and artificially depressed prices. Known as the Pagdi system in Mumbai, tenants are not covered under the authority.
The Pagdi system, which has been in existence since pre-independence era across many parts of the country, is a rental model. While it is similar to most of the lease models, there is one crucial differentiating factor that makes the tenant a part owner of the house, excluding the land.
Under the current RERA rules, tenants of these buildings are considered as co-promoters of the project given that they are expected to get part of the project as compensation for their rights. So, they don’t enjoy the same rights as other home buyers.
Once brought under the RERA, these tenants would be entitled to compensation, among other benefits, in case of project delays.
In Mumbai alone, there are around 16,000 cessed buildings including Pagdi properties. Tenants in these properties pay a tax to the Maharashtra Housing and Area Development Authority (MHADA) that makes provision for repairs of such properties.
According to a MahaRERA official, a realty developer usually redevelops the entire project in phases and keeps the rehabilitation part and free-sale component separate. This allows them to not register the project with the regulator as it is seen as compensation and not a sale, which falls under the RERA purview.
Last year, Maharashtra along with Madhya Pradesh and Punjab were among the first few states to notify rules under the RERA. The state government established the MahaRERA after all sections of the Real Estate (Regulation & Development) Act, 2016, came into force on May 1, 2017. According to the regulation, all projects that are yet to receive Occupation Certificate (OC) and are being sold or marketed is required to be registered with the authority.