Indian Real Estate

A Brief Overview of Pagdi System in India | Homes247.in


03, December 2025

You might've heard about Pagdi or Pagdi-kirayedar

but ever wondered what it was exactly?

Pagdi System is a popular and long-standing form of housing in India. A housing system is a form of rental practice that is still prevalent in some parts of the country, especially in Mumbai. The system got a lot of attention during the pre-independence era under British rule.

now let's explore in detail,

GRC Shreekrish - Homes247.in

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What is Pagdi System?

Pagdi System is a unique form of tenancy where the tenant pays the rental amount in full and had got some ownership rights as in they can sublet their homes. There were no official rental or lease contracts, and the tenant used to get rent receipts every month.

There was also no increase in rent whatsoever. This system was first introduced to bypass paying taxes to British Raj. But soon, it evolved into the form of housing that we see today.

Pagdi System was very popular till 1999 when the Rent Control Act was brought into existence. Even now, there are over seven lakh Pagdi homes in Mumbai. Kolkata and Delhi are the other major cities where the Pagdi systems are still active.

The Legality of the Pagdi System

Section 56 of Rent Control Act of 1999 made the Pagdi System legal. According to which the owner of the land can provide a part/type/form of the ownership of the particular property in question to the tenant for a sum/deposit of money. However, the tenant, as mentioned before, will only have authority over the property or house, not the land as such, according to the Pagdi system act.

Hence he can sublet the property to someone else, wherein a half part of the same amount which the original tenant receives as rent must be given to the owner. Under the Pagdi system sale of property, the tenant will not be able to sell the property. The tenant will not be able to construct anything or remove any part of the property.

The Government is still planning to bring the Pagdi system under the RERA ( Real Estate Regulatory Authority) and thus bring more protection to the tenants just as the home buyers.

Model Tenancy Act

Model Tenancy Act is an initiative by the Government to regularize the rental sector in India.

The Government also strives to bring the benefits of the same to the Pagdi system in India as well. This will help in protecting the tenants as well as the owners from disagreements and troubles in the rental sector when the chawls are set to be redeveloped into flats in the future; as per the upcoming RERA & MTA, the current tenants will also get the benefits for the same.

These laws are all aimed at revising the age old traditional Pagdi system. This will also help in the re-development of the dilapidated old chawls. This will also reduce the numerous chawl-related accidents.

Here's some recent updates on the topic

Recent Developments and Legal Battles

The Maharashtra Rent Control Act (MRCA) of 1999 sought to establish a legal framework for the Pagdi system. The act was, however, drafted during a different economic era. Property prices skyrocketed as cities such as Mumbai became bustling metropolises. Fixed rents, which were once a form of security for tenants, have become a burden for landlords. They discovered that their rents were far too low to cover even basic maintenance costs, let alone capitalize on the booming property market.

Uncertanities with the Legal Battle

The simmering discontentment reached a boiling point in October 2023, thanks to a landmark Supreme Court decision. A nine-judge bench upheld the legality of the Pagdi system and MRCA provisions, giving tenants hope. However, a major setback occurred when the Maharashtra government, which is in charge of defending the MRCA, failed to file its submissions by the December 2023 deadline. This inaction cast a long shadow, leaving pagdi tenants in a state of anxious uncertainty. The government's silence fueled concerns that it was not committed to protecting their long-held rights, complicating the already complex Pagdi system.

The Quest for Reform

The current situation requires a nuanced approach that considers the concerns of both landlords and tenants. Striking a balance between tradition and reform is critical for navigating this obstacle. Here are some actively discussed potential pathways:

  1. Revision of Rent Mechanism: A well-defined mechanism for periodic rent revision based on specific requirements that could provide some relief to landlords while keeping rents affordable for tenants. This would need careful planning to avoid sudden, exorbitant rent increases that could displace long-term tenants.

  2. Right to Redevelopment: The Pagdi system presents a unique challenge for urban renewal projects. Clear guidelines for the redevelopment of pagdi buildings are required. These guidelines should ensure fair compensation for both parties: tenants receive adequate compensation for their displacement, and landlords have the opportunity to participate in the redevelopment process and reap the benefits of a modernized property.

  3. Bringing Pagdi Under RERA: Integrating the Pagdi system with the Real Estate Regulation and Development Act (RERA) may result in increased transparency and accountability. RERA's provisions, which are intended to protect homebuyers, could be altered to protect the interests of pagdi tenants in a similar way.

  4. Model Tenancy Act: The Model Tenancy Act, proposed by the central government, aims to establish a uniform rental framework across India. While not yet implemented nationwide, its provisions could offer a blueprint for reforming the Pagdi system. By incorporating successful aspects of the Model Tenancy Act, the existing framework of the MRCA could be strengthened to address the challenges faced by the Pagdi system.

Looking Ahead

The Pagdi system's future is uncertain. The government's lack of clarity, as well as ongoing legal battles, create an anxious environment for both tenants and landlords. A proactive approach with well-defined reforms is required to ensure a fair and long-term solution for all stakeholders involved. Finding a middle ground that respects tradition while adapting to the realities of the modern housing market will be key to preserving the unique character of the Pagdi system. The government, legal system, landlords, and tenants will need to work together to chart a new course for this complex and historically significant landlord-tenant arrangement.

So, guys, this was a brief overview of the Pagdi system in India.

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GRC Shreekrish - Homes247.in

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