Maharashtra Moves to End Mumbai’s Pagdi System With New Law

Maharashtra Plans New Law to Dismantle Mumbai’s Pagdi Housing System

Maharashtra has announced plans to introduce a separate regulatory framework to dismantle the Pagdi system , a century-old rental arrangement that has shaped Mumbai’s housing market since the pre-Independence era. Declared by Deputy Chief Minister Eknath Shinde , the move aims to resolve chronic tenant-landlord disputes and unlock redevelopment of thousands of ageing buildings across the city.

Understanding the Pagdi System

The Pagdi system originated before the 1940s and remains recognised under rent control laws . Tenants pay a substantial one-time premium (pagdi) to landlords at the time of occupancy, securing near-permanent tenancy rights. Monthly rents are extremely low and often unchanged for decades. While some tenants acquired partial ownership rights, legal title usually remained with landlords. Tenancy rights could also be transferred, with sale proceeds shared between both parties.

Why Reform Became Necessary

Over time, the system created deep economic and legal distortions . Landlords earned negligible rent, insufficient even for maintenance or property taxes, leading to widespread structural decay. Redevelopment stalled as landlords lacked financial incentive, while tenants feared eviction or loss of rights. The system also encouraged cash-based transactions , reducing transparency and state revenue. Legal ambiguities frequently resulted in prolonged court battles during redevelopment attempts.

Key Features of the Proposed Framework

The new law seeks to rebalance rights and responsibilities . Tenants are likely to receive clearer ownership or equity stakes in redeveloped properties, improving security. Landlords may gain revised rent structures, compensation mechanisms or redevelopment benefits that make projects viable. A dedicated regulatory body is expected to streamline approvals, reduce litigation and bring transparency to transactions.

Urban Impact and Way Forward

Rather than favouring one side, the reform aims for mutual benefit . Tenants gain safety and clarity, landlords regain economic viability, and Mumbai stands to benefit from accelerated redevelopment and improved urban resilience.

Exam Point

• Pagdi system predates India’s Independence and is recognised under rent control laws.

• Pagdi rents are far below market levels .

• Mumbai has thousands of ageing Pagdi buildings awaiting redevelopment.

• Redevelopment disputes often lead to long court cases .