Why is Redevelopment of Mumbai's Pagdi Buildings Creating a Rift Between Residents and Realtors, Again?

Living right at the prime location of Colaba Causeway, often buzzing with the shopaholics, the retired professor Margaret Da Costa often wonders how many times she gets the eviction notice to vacate the house. In a 700-square-foot house, the threat of eviction haunts her as she is living independently at 67 and has seen these notices before as well. 

Such is the condition for the majority of the tenants with the Pagadi system. The century-old system that largely dominates the tenancy system in the south and the central Mumbai has been a talk-point even in the recently-concluded local polls of Mumbai, with the ruling Mahayuti government announcing a "pagdi-free" Mumbai.

But the common question remains for the residents: How? "How will the government differentiate between the real tenants and the illegal tenants, those who have illegally occupied the buildings?" asks Pervez Cooper, a resident and a citizen activist from Colaba, who has been vocal about the issues. "More than half of the tenants in these buildings are living illegally, and the cost is likely to be borne by the legal occupants," he adds. 

The system dates back to the pre-Independence era, when a tenant paid a large sum, known as 'pagdi', only once to the landlord upon moving into the house. In return, the tenants can live on a nominal monthly rent for life. However, this also makes the tenants the partial owners of the house.

Costa is living in a house leased by her father in 1968, after paying a large sum to the landlord. She has been paying approximately Rs. 2,500 in monthly rent, and her building is currently owned by Dena Bank, which has five residential units and one commercial unit at the front. "The house might cost around Rs. 6 to 8 crores; however, people are offering me money as little as Rs. 50 lakh for it," she laments. 

The system has been grappling with these challenges for a long time, as there have been cases of tenants selling their tenancy rights and often subletting the property, creating a system where, even if tenants are not the full owners, landlords do not have complete control over their property. 

Citing an example, Mr Cooper shares how the building in Grant Road, where he owns a shop, also has an illegal guest house running due to the Pagdi system. "After the original owners settled abroad, one of the residential spaces was converted into a 12-room hotel. While they have an electricity bill, they don't have the original papers of the conversion," the 65-year-old says, adding that these things are common under the pagdi system under the jurisdiction of the Brihanmumbai Municipal Corporation (BMC). 

Despite the old system's challenges, the pagdi system remains legally recognised under the Maharashtra Rent Control Act, 1999, which aims to balance landlord and tenant rights by regulating rents, repairs, and evictions.

Costa, the former professor at Xavier's School of Communication (XIC), got the eviction notice in 2011 for the first time under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. Currently, according to the Maharashtra government, Mumbai has more than 19,000 rent-controlled buildings under the pagdi system, many of which were built before 1960. 

The current upheaval divides residents and realtors

While some of these buildings have been redeveloped over the years, many remain in dilapidated condition. According to reports, more than 13,000 such buildings are still awaiting redevelopment. Recently, as the Deputy Minister, Eknath Shinde announced paving the way for the redevelopment, it was likely to create a difference between the residents consisting of tenants along with the landlords and the real estate developers.

The existing redevelopment options under regulations such as 33(7) and 33(9) will continue; however, the government plans to introduce an additional route for buildings that have not benefited from earlier policies.

On the other hand, the move can be seen as beneficial for real estate firms, which are likely to secure prime spots in the city. "The Pagdistock sits in some of Mumbai’s most land-constrained and highest-value precincts (referring to the South and Central Mumbai). A coherent redevelopment framework that reduces transactional and legal friction converts low-yield, legacy assets into developable plots — effectively creating scarce, prime development land inside the city," says Mayur Panghaal, Owner and Legal Head from Sky Properties.

As per the proposed rules, tenants will reportedly receive floor space equal to the area they currently occupy, while landlords will receive floor space based on their land ownership entitlement. Those tenants belonging to the economically weaker sections and low-income groups, the government, along with the FSI incentives, is planning to ensure that the full cost of reconstructing their homes is covered through additional incentives.

Calling it a "long-awaited shift in Mumbai’s housing policy", Gulam Zia, International Partner, Senior Executive Director - Research, Advisory, Infrastructure, and Valuation from the Knight Frank India, says, "From a market perspective, structured redevelopment, balanced FSI allocations and incentives for economically weaker tenants could make erstwhile stalled assets more bankable and expand supply in areas that otherwise offer limited development scope."

Talking to Local Samosa, Panghaal outlines how the conversion might look. He says, "This is not a mass immediate conversion — expect a pipeline of projects where viability will be set building-by-building (structure condition, tenant composition, ownership title, ability to use incentive FSI/TDR). The best returns will go to firms that combine legal/transaction expertise, local political capital, and balance-sheet capacity."

Prime South Mumbai prices, as per recent market reports, typically range from roughly Rs. 70,000–Rs. 150,000 per sq.ft in the top sea-facing/heritage pockets with many premium projects trading above Rs. 1 lakh/sq.ft. "This is the demand ceiling that the newly-redeveloped product would target," Panghaal shares.

Perhaps this is why the residents, living as tenants and activists, are against it. "If a 3-storey building is converted into a 42-storey building (for instance), who will benefit? "Only builders and landowners will enjoy," Mr. Pervez laments, who has himself witnessed such evictions by the Bombay Port Trust.

'Still complex for the real estate'

However, the century-old system might have its own set of challenges even with the regulations for the realtors, Sky Properties'  Panghaal believes. "The Pagdi system is governed by rent-control and tenancy laws that have produced decades of litigation and layered rights (pagdi premium payments, successor rights, partial ownership claims). Developers must budget legal timelines and acquisition risk

As estimates suggest, tens of thousands of Pagdi buildings remain with pending disputes, the brand owner shares how, even if the government has proposed fast-track courts, legal uncertainty will persist for years on many. Knight Frank's Gulam Zia stresses how stakeholders must navigate complex tenant-landlord dynamics, pending litigation and rehabilitation expectations, which require thoughtful processes and robust dispute resolution mechanisms. "Should these be addressed efficiently, the reforms could create meaningful value while safeguarding equitable outcomes for all parties."

Such is the fear gripping the locals. "For any redevelopment, the legal tenants must be considered first," Mr. Cooper opines, reiterating the different occupants under such systems.

Since many Pagdi buildings are old and structurally compromised, redevelopment requires detailed structural audits, BMC approvals, and environmental and heritage clearances (where applicable). Speaking on behalf of the industry, Mayur Panghaal, states, "Redevelopments with multiple incumbent households require robust rehabilitation planning (temporary housing, phased construction). Time, cost and interface risk are higher than in typical greenfield development."

"It is important to hire or partner with lawyers experienced in Pagdi law, rent control, and conveyance, and prioritising buildings where a clear title exists, tenant composition is small and/or cooperative, structural surveys are favourable, and incentive FSI/TDR is demonstrably usable," he further says.

As the local body polls in the state conclude, only time will tell what the beginnings for the redevelopment look like - both for the residents and the realtors.