The Maharashtra government is preparing a major reform of Mumbai’s century-old pagdi building system, a move expected to significantly reshape the city’s rental housing and redevelopment landscape. The initiative is being driven by the State Housing Department, which is working on regulatory reforms to discipline the real estate environment and balance the interests of landlords, tenants, and developers.
With acute land scarcity, aging housing stock, and stalled redevelopment projects across Mumbai, the proposed changes aim to bring greater transparency in ownership, establish clear tenancy titles, and unlock redevelopment potential in prime urban areas.
Understanding the Pagdi System in Mumbai
The pagdi system is a traditional tenancy arrangement that has existed in Mumbai for several decades. Under this system, a tenant pays an upfront premium (pagdi) to the landlord in exchange for the right to occupy a unit, lifelong tenancy protection, and highly subsidised rent.
While the legal ownership remains with the landlord, tenants enjoy near-ownership rights. These include the ability to transfer tenancy rights to a third party. Such transfers typically involve sharing the pagdi amount between the outgoing tenant and the landlord in a pre-decided ratio.
Historically, the system worked efficiently as it allowed landlords to secure immediate capital without losing ownership, while tenants enjoyed stability and affordability. However, over time, the pagdi system has led to grey areas in ownership claims, unclear legal rights, and serious complications in redevelopment, particularly in south and central Mumbai.
Why the Government Wants to Reform the Pagdi Framework
A large number of pagdi properties fall under cessed buildings, which are old rent-controlled structures in Mumbai, mostly constructed before the 1960s. According to Brihanmumbai Municipal Corporation (BMC) safety audits, many of these buildings are categorised as:
• C1 – Critical condition, requiring immediate demolition
• C2A / C2B – Major structural repairs or redevelopment needed
• C3 – Minor repairs required
Redevelopment of these buildings has been slow due to conflicting ownership claims between landlords and tenants. The absence of clear compensation guidelines for pagdi settlements has further complicated matters. Developers remain hesitant due to uncertain tenant lists, rent arrears disputes, and prolonged litigation risks.
The government’s proposed overhaul aims to modernise the pagdi system, ensure fair and structured compensation, and accelerate redevelopment in high-density zones.
Proposed Policy Direction and Ownership Reforms
Although the final policy is yet to be officially notified, the direction set by Chief Minister Eknath Shinde points toward a fundamental restructuring of pagdi arrangements.
One of the most significant reforms under consideration is the formal recognition of tenants as part owners, particularly during redevelopment situations where negotiation reaches a deadlock. This move could redefine ownership rights and bring much-needed clarity to long-standing disputes.
Such recognition would also help resolve title ambiguities, making redevelopment projects more feasible from both a legal and financial perspective.
Impact on Tenants, Landlords, and Developers
For tenants, the proposed reforms promise greater legal clarity, stronger ownership recognition, and fair compensation during redevelopment. It could finally formalise the rights they have exercised informally for decades.
For landlords, the changes may help unlock stalled and underutilised properties, enabling them to benefit from redevelopment while receiving a fair share of the project value.
For developers, a structured and transparent framework would reduce uncertainty, minimise litigation risks, and make redevelopment projects in pagdi buildings financially and legally viable.
Conclusion: A Long-Awaited Reform for Mumbai’s Urban Future
The Maharashtra government’s move to reform the pagdi system marks a crucial step toward resolving decades-old housing challenges in Mumbai. By balancing tenant protection with ownership clarity and redevelopment incentives, the proposed policy has the potential to transform Mumbai’s aging housing stock, improve safety, and promote sustainable urban growth.
