Should Tenants Redevelop Their Dilapidated Buildings?

Unfair regulations often lead to further control. In the same way, rent controls discouraged people to rent out their houses in Mumbai. The reason: Inflation in independent India has always been high, except between 1999 and 2006, and for a short period in 2014-15. The rent control regulations froze rents nearly seven decades ago. Landlords and real estate developers do not have an incentive to redevelop properties when the cost of living and the cost of construction material are rising. But many such buildings are in a shambles. When buildings crumble, people die and tenants often blame landlords for not redeveloping properties.

Now, the Maharashtra government wants to give tenants the right to redevelop buildings if the developer delays redevelopment. Why? The government thinks that tenants do not want to vacate these houses because it is difficult to find alternative accommodation. But these tenants are always in a precarious situation -- if a building gives way, many people will lose their lives. This does not mean that real estate developers and owners are unique in being slow in redeveloping properties. Noted writer and journalist Dilip D'Souza once noted that such tenants would be better off redeveloping the buildings themselves, because tenants benefit from redevelopment. They also pay the cost of not redeveloping properties.

If the Mumbai Building Repairs & Redevelopment Board decides that a building is going to fall, the building will be redeveloped at the expense of the government. But authorities are often too late in deciding whether a building is about to collapse or not. Tenants often pay the price of the errors or delays of the redevelopment agency with their lives.

An interesting fact is that when authorities redevelop properties, they raise the floor area ratio, or the ratio of the area of a building to the size of the plot. When FAR is raised from 2 to 3, for example, a building's height may go up from two floors to three floors. Why do authorities raise FAR? They know that it is not financially viable to redevelop properties without increasing the floor area. 

The fact is that these ramshackle buildings do not lower the demand for such properties in the rental market. In Mumbai, even multinational banks and large corporations compete for space in dilapidated buildings, though such buildings should have been redeveloped decades ago. The housing ministry, however, is finalising the model tenancy Act, which will allow landlords to collect rents at market rate. This may soon become a law, making rental markets more efficient.

However, many argue that rent controls do not affect maintenance. They point out that tenants contribute to the maintenance of the property, even when the landlord neglects it. This is seldom true. Mostly, it is large apartments in the island city that are well-maintained. Most other apartments under rent control are in a poor state. Many of such small apartments are also near railway tracks which increases their risk of collapsing. Researchers like Alain Bertaud point out that one just has to walk through central Mumbai to see many such buildings, in high-demand areas, that are not replaced. It is undeniable that a problem exists. It is so much better if anyone willing to redevelop these properties is allowed to redevelop them.