Why has Delhi HC criticised the law capping rents in Delhi as unjust, and called it anachronistic?

Indian Express

3 days ago

Earlier this month, Delhi High Court criticised the tendency of some well-off tenants to 'unjustly' occupy premises paying a pittance as rent, while their landlords are forced into 'impecunious and desperate circumstances'.
This, the court said, was an 'egregious misuse' of the Delhi Rent Control Act, 1958, which it described as an 'anachronistic piece of legislation'.
The court was hearing a challenge to orders passed by the additional rent controller in 2013, which had dismissed eviction petitions relating to a property in Sadar Bazar, and ruled in favour of the tenants.
The 1958 law has allowed many tenants of properties in areas such as Connaught Place, Karol Bagh, and Chandni Chowk to continue to pay rents that are sometimes as low as Rs 500.
What is the Delhi Rent Control Act (DRCA)?
The DRCA was enacted to regulate rents, prevent arbitrary evictions, and define the rights and duties of landlords and tenants in Delhi.
The Act restricts landlords from charging tenants more than a fixed 'standard rent', and prohibits the collection of extra charges. It also specifies the limit by which rents can be increased – not more than 10% in three years.
There are strong protections for tenants against eviction, and landlords are allowed to throw out tenants only under specific conditions, such as non-payment of rent and subletting without permission.
The law also lays down the procedure for depositing rent, mechanisms for appeal, and summary eviction processes in certain cases.
The DRCA was enacted in the aftermath of World War II and Partition to protect tenants in a situation of scarce housing in Delhi.
Is the DRCA applicable everywhere in Delhi?
The law is not applicable to government-owned premises.
Later, certain other categories of properties were excluded from the ambit of the Act, such as those where the rent was more than Rs 3,500, and 'premises constructed on or after the commencement of the Delhi Rent Control (Amendment) Act, 1988, for a period of ten years from the date of completion of such construction'.
It is important to note that while the Act is technically applicable to all remaining properties in the city, the precise percentage of housing to which it is applicable is not known because of the existence of a large number of illegal and unplanned settlements. In fact, about a quarter of Delhi's population is believed to be living in slums or squatter settlements.
Implementation of the Act is uneven and mostly ineffective. Tenants pay market rents, not 'standard' rents fixed after both parties approach a rent controller. Landlords often do not issue rent receipts, and in many cases tenants have to make large advance deposits before they move in.
What are some of the criticisms of the rent control law?
Like rent control laws in other states, the DRCA has been criticised for being too tenant-friendly and facilitating an unfair situation of unrealistically low rents for landlords. Indeed, in the older markets of Connaught Place, Karol Bagh, and Chandni Chowk, monthly rents for some residential and commercial properties that are valued at crores can be still as low as Rs 500.
In this situation, landlords often prefer to withdraw their premises from the rental housing market, creating an avoidable shortage and distorting the market. Economists have criticised rent control legislation around the world for decreasing or freezing the supply of urban rental housing, and for leading to a deterioration of housing stocks as a result of a lack of incentive for landlords to invest in maintaining and upgrading it.
The National Urban Rental Housing Policy 2015 noted that rent control legislation in various states have 'resulted in rental housing being economically unattractive and thereby creating an informal market'.
Rent ceilings had led to reductions in both the quality and quantity of housing, the policy said. 'These laws not only restrict supply but also drive away legitimate seekers of rental housing which force tenants into unrecorded and informal arrangements,' it said.
Since land and housing are State subjects, the central government drafted a Model Tenancy Act in 2021 as a framework that could be adopted by states and Union Territories. The model Act sought to balance the interests of landlords and tenants by allowing rent be decided by mutual agreement between the parties.
However, the Act has so far been adopted by only four states: Assam, Uttar Pradesh, Andhra Pradesh, and Tamil Nadu.