Complete Guide to Pagdi Tenant Rights in India Rent Guide

The Indian real estate market is evolving rapidly — but one traditional rental model continues to survive in major metros, especially Mumbai: the Pagdi System.

Rooted in pre-independence India, this tenancy model is known for minimal rent, high upfront deposits, generational tenancy rights, and complex legal obligations.

If you're a current tenant, landlord, or investor, understanding the Pagdi system is essential — not only to protect your rights but also to prepare for regulatory changes that may impact this setup in the coming years.

This guide covers:

✔ What the Pagdi system means
✔ How tenancy rights work
✔ Legal protections under the Maharashtra Rent Control Act
✔ Tenant rights during redevelopment
✔ Eviction rules and exceptions
✔ Future possibilities under the Model Tenancy Act
✔ Whether the system might phase out over time

What is the Pagdi System?

The Pagdi system is a rental model where the tenant pays a one-time lump sum amount, known as Pagdi, to the landlord in exchange for:

     ♦ The right to occupy the premises indefinitely

     ♦ Payment of very nominal monthly rent

     ♦ Generational tenancy inheritance

     ♦ The ability to sell or transfer tenancy rights

This is different from normal renting where both the security deposit and legal rights are limited.

Why Was the Pagdi System Created?

Historically, during British rule and post-independence era:

     ♦ Housing was scarce

     ♦ Rental markets were unregulated

     ♦ Landlords frequently increased rents

     ♦ Tenants had no security

To protect tenants, governments passed Rent Control laws which froze rents at extremely low amounts and prevented eviction except under strict conditions. This led to the widespread use of the Pagdi system in Mumbai.

How Pagdi Works in Practical Terms

When a tenant pays Pagdi:

     ♦ The landlord receives a large amount upfront

     ♦ The tenant pays very low rent for life

     ♦ The tenant becomes a quasi-owner

     ♦ The landlord cannot evict the tenant easily

     ♦ In many cases, the lump-sum Pagdi amount was 10–30% of the property’s market value historically, but today it may be much higher.

What are the Legal Rights of Pagdi Tenants in India?

Pagdi tenancy is primarily governed by the Maharashtra Rent Control Act, 1999, which gives tenants stronger protection than modern rental agreements.

Below are key legal rights every Pagdi tenant should know:

1. Right to Co-Ownership Benefits

While the landlord retains ownership of the building, Pagdi tenants are treated as co-occupants of the premises. This means:

     ♦ They can sell or transfer their tenancy rights.

     ♦ They can sublet the property under certain conditions.

This quasi-ownership gives them significant control over the premises despite not holding the title deed.

2. Right to Sublet the Property

With the landlord’s consent, the Pagdi tenants can:

     ♦ Sublet fully or partially to another person.

     ♦ Charge rent to the sub-tenant.

     ♦ Often retain rights as the primary tenant.

3. Right to Occupy the Premises Indefinitely

As long as the tenant:

     ♦ Pays the rent on time

     ♦ Follows the terms of the tenancy

They have the right to stay indefinitely. The landlord cannot arbitrarily evict the tenant or demand unreasonable changes.

4. Right to Participate in Redevelopment

Pagdi tenants have a say when their building undergoes redevelopment. They can:

     ♦ Form a society or association with other tenants.

     ♦ Negotiate terms with developers or landlords.

     ♦ Secure rehabilitation or alternate housing as part of the project.

5. Right to Sell or Transfer Tenancy

A Pagdi tenant can sell or transfer their tenancy rights to another party. This usually involves:

     ♦ Landlord’s written consent,

     ♦ Sharing a percentage of the sale amount with the landlord.

This right is one of the most valuable aspects of the Pagdi model.

6. Inheritable Tenancy Rights

Tenancy rights under the Pagdi system are inheritable. If the original tenant passes away, legal heirs who were living with them — such as a spouse, child, or parent — can continue the tenancy without disruption.

7. Protection from Eviction

Eviction is only allowed under specific circumstances, such as:

     ♦ Non-payment of rent,

     ♦ Unauthorized subletting,

     ♦ Misuse of the property,

     ♦ If the landlord requires the unit for personal use.

Even in these cases, the landlord must obtain a court order to legally evict the tenant.

Is the Pagdi System Changing? What You Should Know

Currently, Pagdi tenancies are protected by the Maharashtra Rent Control Act, 1999. But there’s a possibility that they may be brought under the Model Tenancy Act (MTA) in the near future — with state-level adaptations.

What Might Change Under the Model Tenancy Act?

The Maharashtra government is considering a phased transition that may include:

     ♦ Tenant Protections: Ensuring existing Pagdi tenants are not displaced and can continue their tenancy under similar terms.

     ♦ Modern Tenancy Frameworks: Moving to formal rental agreements that outline mutual obligations more clearly.

     ♦ Rehabilitation Measures: Providing support to Pagdi tenants through redevelopment policies and RERA-backed projects to ensure fair compensation or relocation.

The aim is to balance tenant rights with landlord interests, while modernizing India's rental housing sector.

Conclusion

The Pagdi system, though old, is deeply woven into India’s urban housing history. It offers tenants unique rights and long-term security. However, with growing calls for redevelopment and tenancy reform, it’s essential to stay informed and involved — especially if you’re living in a Pagdi property.

By understanding your rights, you’re better equipped to negotiate fairly, safeguard your home, and prepare for any changes ahead.

FAQs

1. Can I be evicted from a Pagdi flat without notice?
   No. Eviction requires a legal cause and court order.
   
   

2. Can I transfer my Pagdi tenancy to my children?
   Yes, tenancy rights are inheritable if your family lived with you at the time of your death.
   
   

3. Can I sell my Pagdi property?
   You can sell your tenancy rights with landlord consent, often by paying them a percentage of the sale.
   
   

4. Can a Pagdi tenant mortgage the property?
   No. Pagdi tenancy rights cannot be mortgaged as the tenant is not the legal owner. Banks do not provide loans against Pagdi properties.