Maharashtra Unveils Regulatory Framework to End 'Pagdi' System in Mumbai Real Estate
The Maharashtra government, under CM Devendra Fadnavis, has announced a new regulatory framework to phase out the 'pagdi' system in Mumbai, a move aimed at modernizing the real estate market and protecting the rights of both tenants and landlords.
Mumbai Real EstatePagdi SystemMaharashtra GovernmentRegulatory FrameworkRedevelopmentReal Estate MumbaiDec 11, 2025
In a major step towards modernising and strengthening the local real estate market, the Maharashtra government -- led by CM Devendra Fadnavis -- on Thursday announced the establishment of a regulatory framework aimed at freeing Mumbai from the 'pagdi' system of dealing in realty assets. This traditional rental model involves the tenant acting as a part-owner of the property by paying a lump sum initial payment, enjoying special rights to the property, such as subletting, at a relatively lower rent.
Over 19,000 Mumbai buildings are known to follow the 'pagdi' system. The Deputy CM informed the assembly that more than 19,000 cessed, pre-1960s buildings in the city are known as 'pagdi' buildings. While some of these buildings have already been redeveloped, others have deteriorated and collapsed, and nearly more than 13,000 buildings are still awaiting redevelopment, he said.
Tenants living in these properties are protected under the Maharashtra Rent Control Act, a state law that regulates rentals in select premises. The law aims to balance the interests of landlords and tenants alike. Under the Maharashtra Rent Control Act, tenants living in these cessed buildings are legally valid through their agreements. However, over the years, several landlords have complained that they do not receive fair compensation for their ownership, citing the tenants’ rehabilitation rights.
Local courts are flooded with multitudes of pending disputes between tenants and landlords, noted Shinde. This is a common challenge across pagdi-operated rented buildings in the city, and one that warrants the creation of a dedicated framework to ensure their proper and fair redevelopment.
For economically weaker sections and low-income groups, granting the Floor Space Index (FSI) alone is not enough, said the Deputy CM. FSI is a crucial urban planning tool that determines the maximum permissible built-up area on a plot of land. Provisions must also be made for the cost-free reconstruction of their homes, and for this purpose, a separate regulatory framework will be created, said Shinde.
Shinde also told the assembly that the proposed rules will include several significant provisions, including those for granting FSI equivalent to tenant-occupied area, granting the original FSI to landlords (based on land ownership), and providing incentive FSI required for the cost-free reconstruction of the homes of 'pagdi' holders from economically weaker and low-income groups (EWS and LIG).
If, for any reason, said Shinde, such as height restrictions or other limitations, it is not possible to use all three types of FSI entirely, the remaining FSI will be made available in the form of Transfer of Development Rights (TDR). TDR enables owners to sell unused FSI from land needed for public use. Shinde also said that the framework will clear the way for the redevelopment of old 'pagdi' system buildings, preventing the collapse of dilapidated buildings while avoiding the loss of life and property.
Existing redevelopment options such as 33(7) and 33(9) will continue to be available, he said. He also said that this will serve as a new option for buildings that have not yet benefitted from these schemes. There are about 28,000 tenant-landlord disputes over such properties currently pending in local courts, with many families stuck in litigation for decades.
These disputes, he said, must be resolved in order to accelerate redevelopment. With the prior approval of the High Court, adequate additional fast-track courts will be established to dispose of these cases, with the expectation that all cases will be resolved within the next three years, he said. The Deputy CM also said that the scheme will provide ownership homes to lakhs of Mumbai residents living under the 'pagdi' system, and neither tenants nor landlords will face any injustice. He also said that the state government is committed to resolving any challenges related to the process.
Frequently Asked Questions
What is the 'pagdi' system in Mumbai's real estate market?
The 'pagdi' system is a traditional rental model where tenants act as part-owners of the property by paying a lump sum initial payment and enjoying special rights, such as subletting, at a relatively lower rent.
What is the new regulatory framework announced by the Maharashtra government?
The new regulatory framework aims to phase out the 'pagdi' system in Mumbai, ensuring fair and proper redevelopment of the city while protecting the rights and interests of both tenants and landlords.
How many buildings in Mumbai are affected by the 'pagdi' system?
Over 19,000 cessed, pre-1960s buildings in Mumbai are known as 'pagdi' buildings, with more than 13,000 still awaiting redevelopment.
What provisions are included in the new regulatory framework?
The framework includes provisions for granting FSI equivalent to tenant-occupied areas, original FSI to landlords, and incentive FSI for the cost-free reconstruction of homes for economically weaker groups. It also includes the use of Transfer of Development Rights (TDR) for unused FSI.
How will the new framework address tenant-landlord disputes?
The framework aims to resolve tenant-landlord disputes by establishing additional fast-track courts to dispose of cases, with the goal of resolving all disputes within the next three years.
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