Maharashtra Ends the Century-Old Pagdi System with New Legislation

The Maharashtra government has announced a major policy shift by introducing a new regulatory framework to dismantle the century-old Pagdi system, a rental arrangement deeply embedded in Mumbai’s housing history.

Deputy Chief Minister Eknath Shinde stated that the move aims to resolve long-standing disputes, provide legal clarity to tenants and landlords, and fast-track redevelopment of thousands of ageing, dilapidated buildings across the city.

This marks one of the most significant reforms in Mumbai’s urban housing sector in decades.   The Pagdi system, a pre-Independence rental arrangement, became widespread in Mumbai before the 1940s. Though informal in nature, it continues to be recognised under Maharashtra’s Rent Control Act.

In the Pagadi system, Tenants pay a large one-time premium (pagdi) to the landlord. In return, tenants receive near-permanent occupancy rights. Monthly rents remain extremely low, often unchanged for decades.

      In many cases, tenants can resell their tenancy rights, sharing         proceeds with the landlord.  Despite its longevity, the system creates an  unusual situation where tenants enjoy long-term possession,     while landlords earn minimal rent and retain limited control over their     property.

    Over time, the Pagdi model began to strain Mumbai’s housing ecosystem.

    ·               Negligible rent income, making upkeep financially impossible

    ·              Buildings falling into disrepair and structural risk

    ·        Redevelopment deadlocks due to fear of displacement or unclear rights

    ·              Black money transactions from informal tenancy sales

    ·              Legal ambiguities, leading to prolonged disputes and court cases

            With thousands of Pagdi buildings aging and becoming unsafe, Mumbai’s redevelopment pipeline remained stuck for decades.

    The new framework seeks to modernize Mumbai’s rental ecosystem  while balancing the interests of both tenants and landlords through defining ownership  in redevelopment projects, ensuring fair compensation for landlords, providing clear legal rights and   standardised  redevelopment rules and  above all, giving a dedicated regulatory authority aiming at reducing litigation and improving     transparency.These measures aim to break the stalemate that has             prevented redevelopment for years.