Recovering from a year-long paralysis, the government on Friday finally promulgated an ordinance extending the interim Bombay Rent Control Act by a year after amending it. The interim Act would have lapsed on March 31, 1999.While avoiding a backlash from old tenants, which comprise one of its largest urban votebanks, the government will altogether exclude large commercial premises and tenants of all post-1987 buildings from rent control and subject them to the caprice of market forces.

The decision, in consonance with the reported recommendations of the Joint Select Committee (JSC) set up last year, will both tap commercial tenants, who can afford to pay more - public sector undertakings, multinational companies,nationalised banks and embassies with paid up capital of over Rs 1 crore - while also freeing a portion of Mumbai's rental stock from the grip of landlords loathe to renting out accommodation at 1940 levels.

However, while rationalising rents in the country's financial capital, the draft legislation could take this logic a step further and distinguish between commercial and residential premises altogether. Commercial tenants pay roughly twice of what their residential counterparts in basic rent which are frozen, to the landlords, but pay steep repair cess and municipal taxes which have been subject to increases over the years. The state government which still has to frame a new Rent Control law, can exercise the option of increasing reasonably the rent of commercial premises on the basis of the current frozen rents. The same yardstick could also apply to old residential premises, predating the 1940 cut off in the present act, where tenants occupying large premises (over 2,000 sq ft) could be partiallyfreed from rent control.

Such a scenario, however, places post-1987 rented accommodation in a unique predicament. These structures, like those in the Juhu-Vile Parle Development Scheme built after 1987, were brought under an amendment in the Bombay Rent Control Act that year, which exempted them from the standard rent provision for the first five years. During this period, landlords were allowed to fix rent at market rates.

However, landlords were reluctant to comply. Rather than relinquish crores of rupees in pugree, they continued to charge standard rent while making a killing from this illegal source (as much as Rs 2 crore during the peak period).

However, tenants in post-1987 buildings are now worried, wondering whether the Friday's ordinance will apply with retrospective or prospective effect. In the former scenario, they would have to pay more while having to forfeit the pugree amount as it has no legal sanction. The ordinance will also continue to protect tenants of old buildings including the20,000-odd cessed buildings, whom the ruling Shiv Sena has always been careful not to upset. Hence while further nurturing a powerful votebank, the government has managed to extricate itself from a sticky situation temporarily. The main issue of framing a new Rent Act in response to the 1997 Supreme Court judgement still remains.

The Supreme Court, in late 1997, had directed the state government to prepare a new legislation to replace the Bombay Rent Control Act, which was due to lapse in March 1998. The government, however, extended the act till March 1999 while effecting a mere five per cent increase in rent.

However, this January, the Supreme Court admitted a petition filed by landlords, which wanted the interim Act to be scrapped. The case is scheduled for hearing on March 9.