THE RENT CONTROL LAWS IN INDIA: AN ANALYSIS

The rent control laws were enacted in India in order to prevent the so called scarcity of rental
housing. Initially they were introduced as a temporary measure but later on it continued as a policy
decision. The situation in which these laws were enacted is changed but the legislations are not
changed accordingly. Housing shortage still exits in spite of these laws. Moreover these laws are
criticised on the ground of being economically and socially inadequate.2
Rent control is a state subject and falls within the legislative competence of the state. This
imposes a burden of rent reforms on the state. This paper analyses the current status of rent laws in
India and whether they have achieved any reforms. The author is of the view that the present rent
control regime in India forms a major impediment to the intended urban reform as they are always
interpreted in favour of the tenant a lot more than was initially intended.3 Sometimes the ‘biased’
provisions are also declared to be void and ineffective.4
Urban rent control- Present status
Firstly, the current legislation regime establishes a standard fair rent which is calculated on the
basis of the cost of construction of the building and the market value of the land. The rents are frozen
for a specified period of time. There being a clear difference between the market value when the rents
are frozen and the period till which it remains frozen restricts productivity which a landlord seeks to
achieve. Secondly, the laws provide for the prevention of the eviction of the tenants and rent freezing.
This has two implications. One, there is hardly any incentive for the landlord to maintain the house.
Currently, in the event of an accident, an important question that arises is on whom would the burden
of negligence lie? Two, the fear of losing control over their houses permanently, leads to landlords
reducing liquidity in the market for ownership housing. Lastly, rent control distorts incentives,
leading to inefficient allocation of resources and the formation of black markets. Further, rents in
these markets practically become higher than they would have been in absence of rent controls. Thus,
rent controls will actually cause a majority of the people seeking rental accommodation to pay higher
rents than they would have paid in absence of rent controls.