PROPGUIDE − A Complete Property Guide

How Rent Control Act Hurts Delhi Tenants & Landlords Alike

How Rent Control Act Hurts Delhi Tenants & Landlords Alike

Data show that nearly half of Delhi’s population lives in slums or unauthorised colonies. Among various other reasons, the Delhi Rent Control Act, which has been challenged in the Delhi High Court recently, is responsible for the present state of affairs. The Act, its critics claim, hurts the interests of landlords and tenants in equal measures. Landlords in the national capital’s central locations such as the City Zone, the Sadar, Paharganj Zone, Karol Bagh Zone and Civil Lines do not pay house tax because their earnings from these rent-controlled properties are meagre. Tenants of such properties also refrain from paying taxes because they fear that the property will fall out of the rent control regime if they pay the tax. Apart from making housing expensive, rent control laws are also the reason why many buildings in Delhi are poorly maintained.

However, Delhi’s experience is not unique. Throughout the world, rent control laws make housing expensive and hurt the interests of landlords and tenants, especially the low-income households. Unlike other Asian countries such as Singapore, Hong Kong and Japan which became prosperous as they made housing affordable by repealing rent control laws. In fact, rent control laws were imposed in most countries during the World War-II but were either repealed or mellowed over the next few decades. In Delhi, where the Rent Control Act was imposed in 1939, the law went through an evolution till 1959, but did not undergo major changes.

A look at how the archaic Act hurts Delhi’s economy:

  • Even though the assumption is that rent control laws help poor tenants at the expense of wealthy landlords, this is often not the case. Tenants in large Indian cities are often a relatively privileged minority. Even in cases in which renting out properties is a market transactions, landlords feel that they do not have much of an incentive to rent out properties. This is extremely harmful to the economy in a city like Delhi, where much of the population migrated from other parts of the country. When there are less apartments in the rental market, because of low supply and high demand, rents of apartments outside the rent control regime will rise.
  • The Rent Control Act leads to low foreign investment in Delhi. Investors are unwilling to put money in the construction industry fearing that their property might fall under the rent control regime.
  • In commercial space, rent-controlled properties hamper market process. For example, if a store in Delhi’s central business district, Connaught Place, is under rent control and another is not, the former would have an undue advantage. The operating costs of the store, which pays market rent, would be much higher and it would be hard for such a store to compete against the other. 
  • As world economies are becoming increasingly globalised, inter-city migration is also gaining huge significance. If your services are more valuable in Delhi than in Mumbai, it should be easier for you to migrate from Mumbai to Delhi. For this to happen, rent control norms should be less stringent and apartments and office spaces easily rentable.  
  • Rent control also hinders urbanisation by raising the cost of moving from villages to cities. When people move from villages to cities, they do not have much capital to begin with. The presence of rent control makes the transition even more expensive. Rent controls also encourage slum developments. Outside the purview of formal markets, these comparatively cheaper informal dwellings flourish freely.
  • Rent control lowers the number of opportunities in the construction sector. Because of rent controls, redevelopment of properties is less likely to happen. This is because landlords do not prefer to invest heavily in properties that they rent out for small amounts of money, and cannot easily sell. Moreover, the investments in the real estate sector decline, too. This further lowers investments in the construction industry. 
  • Rent control makes it easier for tenants to misappropriate properties. This makes encroachment of property a common practice in India.
  • Rent control laws allow people to live in large apartments even when they do not need much space. For example, elderly or single people who lives in a large rent-controlled apartment would keep occupying more space than needed because they don’t have to pay much as

Tags: Projects, Real Estate, Rent control act, Delhi High Court, News And Views, propguide, single window clearance system

#Budget2017: Affordable Housing To Get Infrastructure Status

After Finance Minister Arun Jaitley presented the Union Budget 2017-18, Prime Minister Narendra Modi said the housing sector stood to gain immensely from the new announcements.

February 01 2017

+ Click Here To Read This Article

#Budget2017: Real Estate Sector Demands Simple And Effective Norms

One of the major announcements was of the Real Estate (Regulation & Development) Act 2016 (RERA), which is expected to be profitable for both customers as well as builders, will bring about a great deal of transparency.

January 31 2017

+ Click Here To Read This Article

#Budget2017: Regulation Of Construction Material, Reducing Construction Cost Are The Key Areas To Focus On

Housing for All by 2022, act as a major driver for the upliftment of construction industry. in the upcoming Union Budget 2017, any policy announcements in infrastructure and industries will directly benefit the construction industry too, which is at present seems positive.

January 19 2017

+ Click Here To Read This Article

#Budget2017: Top 5 Wishes On A Real Estate Developer's Mind

One of the country’s largest contributors towards Gross Domestic Product (GDP) and employment generation, real estate sector, is extremely hopeful for a positive Budget 2017-18.

January 17 2017

+ Click Here To Read This Article

Solar Rooftops Could Help You Cut Down Energy Bills. Know How

Increased urbanisation and rising incomes are expected to result in an exponential growth in housing. Replacement of diesel generator (DG) sets with solar rooftops in residential housing complexes would be vital to achieve the determined target of installing 40 GW rooftop solar power capacity in India by 2022.

January 11 2017

+ Click Here To Read This Article

Real Estate Projects In Dire Need Of A Single-Window Clearance System

The real estate industry players expect the government to introduce a single window clearance system for real estate projects in the Union Budget 2016-17. The move would reduce red tape and projects are less likely to get delayed.

February 23 2016

+ Click Here To Read This Article

#Budget2017: Arun Jaitley Tweaks Definition To Make Housing More Affordable

Things are looking up for the Housing For All 2022 program of Central Government after the announcement of annual budget 2017, by Finance Minister Arun Jaitley. Giving infrastructure status to “Housing For All” is a welcome step taken by the Central Government. This would henceforth help the developers in availing loans from banks other nationalised financial institutions.

February 01 2017

+ Click Here To Read This Article

#Budget2017: FDI Norms May Be Eased Later This Year

Finance Minister Arun Jaitley announces the abolition of Foreign Investment Promotion Board (FIPB).

February 01 2017

+ Click Here To Read This Article

Here are the week’s top news stories from the real estate sector.

Here are today’s top news stories from the real estate sector.

Data show Bengaluru has seen the highest net office space absorption in the past nine years. This...

In the recently released World Happiness Report 2017, India is ranked 121 in a list of 155 nations....

The Goods And Services Taxes has clearned a proposal to charge a cess of 15 per cent on luxury cars...

PropGuide tells you how a better metro connectivity will raise real estate prices in Noida.

The first phase of a Metro network is already changing the way people commute in Bengaluru. Upon...

Banks and developers are taking several initiatives to shift India’s home-ownership pattern in...

A building code is a set of norms that govern construction of buildings by stipulating minimum...

PropGuide simplifies complex real estate jargons for you.

Proptiger has released it's quarterly review report on India's real estate sector. Ankur Dhawan,...

Prime lending rate is the interest rate at which banks lend to its most credit worthy...

Subscribe Now

To stay tuned with real estate updates


x +

Drop Your Query here