The hike in lease rates, announced in the new leasehold policy, will affect the monthly rents that tenants who occupy old buildings pay. The policy will also further drag down the real estate market, builders said.
“We will have to pass on the burden to tenants,” said BR Bhattad, executive president, Property Owners Association. “Any increase will have to be borne by tenants as we are just recovery agents.”
Bhattad said there will be a lot of resistance from tenants. “There will be litigations,” he said.
When asked whether the rent control law, which has fixed rents of certain old buildings, would offer relief to tenants, Chief Minister Prithviraj Chavan did not have an answer.
Swadhin Kshatriya, additional chief secretary (revenue), said the lessees and their tenants will have to resolve conflicts themselves. The lessees will get notices explaining the formula for calculating lease rent and will get an opportunity to air their grievances before the respective district collector. “We have ensured a reasonable lease rent and expect people to cooperate,” Kshatriya said.
Advocate Vinod Sampat called it a regressive move. “These properties are old and need maintenance, which already taxes the residents. The property tax is already going to increase and now this is an additional burden,” he said.
Ramesh Prabhu, president of Maharashtra Societies Welfare Association, said because the lease rates are based on market rates in the Ready Reckoner, the rents will keep rising. “The ready reckoner is revised every year,” said Prabhu. The policy states that the rent will be revised every five years as per the prevailing market rate.
Builders said the policy goes against the concept of affordable housing. Lalit Kumar Jain, national president, Confederation of Real Estate Developers of India (CREDAI), said: “It will put pressure on the real estate market, which is already suffering from poor demand and increased costs.” Explaining the issue, he added: “The lessees will shy away because of increased lease rates and shorter tenure.”
Paras Gundecha, president of Maharashtra Chamber of Housing Industry, said the increase in lease rates would have an adverse effect on the rental market in Mumbai. “In an economy that is already reeling under market pressures, this move will further affect buyer sentiment. A lease period of only 30 years will jeopardise potential leases,” he said.