Areas in Delhi’s Central Business District and some of its peripheries come under the governance of the Delhi Rent Control (DRC) Act, 1948. Landlords whose properties fall under the archaic rent control act have a limit on their right to increase the monthly rent.

After the Partition, Delhi saw migrants in massive numbers, which presented the Government with the problem of resettling thousands. The Government was also wary of social acceptance of all these migrants and feared rejection and eviction of the tenants without prior notice from landlords.

To combat this problem, the Delhi and Ajmer-Mewara Rent Control Act, 1948, and later the Delhi Rent Control Act, 1958, was instituted. Under these Acts, tenants were provided with rights that protected them from untimely eviction. The motivation behind the institution of this Act was the protection of economically weaker sections who could neither afford a home nor apply for loans due to low credit scores.

Under the Act, the Government put a ceiling on the rent and set rules, which were skewed towards tenants, creating a general disinterest among investors for purchasing a property in Delhi. In 1988, the Act was amended, exempting properties commanding monthly rents over Rs 3,500 then, from the rent control act. Till date, the Act continues with the same archaic norms as per which, landlords do not enjoy the right to revise the rent even now. Further, they cannot even evict a tenant, except under extreme circumstances.

Court Petitions over the years

The total number of appeals or petitions with regards to the DRC Act before district and additional judges of the Delhi High Court (HC) number at over 10,000. About 27.9 percent of all civil cases regarding rent control are under the DRC Act, which has not been amended in over three decades.

In 2010, a team of three lawyers cum activists challenged the relevance of the archaic regulations of the Act.

In January this year, a group of landlords approached the Delhi HC’s bench challenging the constitutional validity of the Act. This plea argued that dwellings were rent controlled irrespective of the market rent of the property, but it was ultimately rejected by the court.

The Committee for the Repeal of Delhi Rent Control Act vows to take these appeals to the Supreme Court later this year, where they expect some justice for landlords.

Overcoming the challenges posed by DRCA

Homeowners in areas covered by the DRCA have been on the fence about renting out their property due to the lack of consideration that they can fetch under the Act. The situation prevails across the residential and commercial pockets of the Central District, where over 10 percent of all litigation at the District Courts is under the DRC Act.

The Act allows the landlords to raise the monthly rents by 10 percent every three years. This is highly in contrast to the average increase witnessed in rents in these areas over the years. Since the original monthly rents were approximately Rs 10 to a maximum of Rs 1,000 in 1988, when the Act was last amended, an appreciation of this rate has failed to generate any substantial returns on investment for the landlords. The Act states that until the average rent touches Rs 3,500, the properties would stay under the purview of the DRC Act. Here is an analysis of the number of years it would take a property to fetch a monthly rent of Rs 3,500, which runs over 50 years in most cases.

Rent as on 1988 (in Rs)

Years until Rs 3,500 is reached

10

                      184.38

50

133.71

100

111.09

200

90.09

300

77.31

400

68.25

500

61.23

600

55.5

700

50.64

800

46.44

900

42.72

1000

39.42

                                                                                   Source: Petitioners appeal to the Court, January 2019

 Consequences of the archaic rent law in Delhi

The DRC Act has reduced the quality of housing, as landlords show no interest in maintaining properties or improving the quality of amenities when it ultimately results in paltry returns. These laws not only restrict supply but also drive away legitimate seekers of rental housing which forces tenants to settle for unrecorded and informal arrangements.

Deepak Chawla, DCRE Properties, South Delhi, avers, “There is no motivation for landlords to make any improvement to the property due to low returns under rules imposed by the DRC Act and the Pagdi system. But, the Delhi government this year, allowed landlords of buildings under these laws, especially the Pagdi system, to increase rent by 25 percent for funding the repair work as most of these buildings continue to stand without any safety standards in place.”

Rules governing the DRC Act are generally more pro-tenant, but some pointers can be taken from developments in the rent regulatory authorities of other States. The Tamil Nadu government, for instance, is now pioneering in methods to balance the rent control act. Also, a fast-track court mechanism in this State, to handle eviction disputes, is expected to boost the rental market. Revoking rent control will boost the confidence of property owners aiming at favourable rental returns, and thereby help unlock the potential of the rental housing market.

There are petitions in HCs of States like Maharashtra, Tamil Nadu and Karnataka appealing for the abolishment of such archaic rent control laws. With some of these appeals reaching fruition, Delhi may not be far from instituting a rent act favourable to both the parties, the tenants as well as the landlords.