The Wall Street Journal

June 5, 2006

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Tenants in Mumbai
Will Endure a Lot
For an $8.50 Flat

Why Sojatwala Family Stayed
In Rent-Controlled Digs
After a Building Collapse
June 5, 2006; Page A1

MUMBAI -- When four floors of his building caved in last month, killing three of his neighbors, Uttamchand K. Sojatwala refused to leave his two-bedroom, rent-controlled apartment. When the city then cut off his electricity and water and threatened to arrest his wife, he still wouldn't budge.

Mr. Sojatwala, owner of a thriving textile business, and 58 other tenants hunkered down in a building the city has declared too dangerous for habitation.

For those who have resisted eviction and risked their lives, there was a tantalizing reward: dirt-cheap rents. Mr. Sojatwala pays $8.50 a month, a price that was set on Sept. 1, 1940, under the "Bombay Rents, Hotel and Lodging House Rates Control Act."

The escalating tension between landlords who can't afford to keep up their properties and tenants who will go to extraordinary lengths to stay in rent-controlled apartments illustrates a broader clash unfolding in today's India. A number of perks -- from electricity subsidies to rigid labor laws -- are coming under scrutiny as the government seeks to remove impediments to investment and spur growth.

[Uttamchand Sojatwala]

Millions of renters in this city formerly known as Bombay pay just a few dollars a month for residential and commercial space. Landlords can't raise rents to market levels, and they have trouble evicting renters, many of whom ultimately pass their rent-controlled apartments on to the beneficiaries of their wills.

Mr. Sojatwala and fellow residents of "Building 333" dug in. Though part of the complex had collapsed, they felt that their side of the five-story building was still sound. They pooled about $6,000 to reinforce floors.

"It wasn't our part of the building that collapsed," the 55-year old Mr. Sojatwala said, sitting in his dark living room as his assistants tried to rig up lights and a fan from power lines pulled from the building next to his. "None of us is going to vacate."

Every year -- usually during summer monsoons -- some of Mumbai's sodden buildings collapse. In the past decade, about 90 people have been killed in more than 50 such accidents, according to the Maharashtra Housing and Area Development Authority. The city government now says more than 100 buildings in Mumbai are in danger of falling down. There are 400 to 500 smaller emergencies a year involving crumbling balconies and toilets plunging through floors.

Landlords constrained by rent control are left to watch helplessly as market prices soar and their assets disintegrate. Although Mumbai land prices have surged more than 30% in the past year, landlords can't raise rents or redevelop rent-controlled apartments without the consent of tenants.

The Property Owners' Association of Mumbai is challenging the rent-control act in court. Members of the association's executive committee tell horror stories of dealing with drawn-out cases that they seldom win.

"I was a witness for the case when I was just a schoolboy," says Janak Mathuradas, a landlord who has been trying for 40 years to evict someone who took over one of his family's apartments after an earlier tenant died. "Today, my son is fighting in the case."

The partial collapse of a Mumbai apartment building, which killed three people, wasn't enough to convince some of the remaining tenants to leave.

Mumbai's rent-control regulations were adopted in 1947 to provide relief to the city's migrants. Following the partition of colonial India into two countries -- India and Pakistan -- thousands flooded into the city. Rents were set at 1940 levels to prevent property owners from gouging during a time of distress. The rent-control measures, meant to be temporary, have proved so politically popular that they have been extended more than 20 times and currently apply to roughly 35,000 buildings, or about 60% of the real-estate market in the city center, the property owners association says.

The result: Landlords are leaving prime parcels of property to decay. The dearth of new apartments means that half of the city 12 million residents live in slums. Meanwhile, the tight supply of high-end residential properties has pushed rents to $2 to $3 a square foot -- higher than rents in some neighborhoods in New York or Singapore. A good two-bedroom apartment in Mumbai can easily go for $3,000 a month.

Rent control has become such an obstacle to Mumbai's growth that the central government has refused to hand over billions of dollars in funds for urban-renewal projects until it can amend its land laws.

Yet changing longstanding rules that affect so many voters in the world's largest democracy won't be easy. Unlike China, where residents regularly make way for new skyscrapers, the beneficiaries of Mumbai's rent controls flex political muscle to stay.

Some politicians admit being torn. "Rent control is increasingly being seen as an impediment for development and affordable housing," says Milind Deora, a member of Parliament representing South Mumbai who wrote a letter to city officials asking them to help the tenants of condemned Building 333. "But politically how do you liberalize it? A lot of them are my constituents."

Mr. Sojatwala has lived in Building 333 for more than 20 years, since buying out his apartment's previous occupant. The building, with an elegantly carved stone facade, was right in the middle of Mumbai's textile district -- an ideal location for his trading business. The Sojatwalas' son, now 22 years old, grew up playing cricket in the hallway.

But while Mr. Sojatwala's family and business have grown, the neighborhood has deteriorated. Garbage and raw sewage collect around his building, trees sprout from the roof and merchants have set up shops in the elevator shaft.

When the building's structure weakened, some tenants pooled money to prop up their rooms with iron bars. Those at the front of the building decided they didn't need the reinforcement.

On May 16, the front of the building imploded after heavy machinery in a goldsmith's shop broke through the fifth floor and fell through three stories below it. Three people from the goldsmith's shop were killed.

Mr. Sojatwala's wife, Shanti Kumari, who had been at her husband's office around the corner, was relieved to see that her home was untouched but was amazed at what she saw: a pile of rubble, machinery and huge rolls of cloth from a fellow textile trader on the lower floors. "There was dust everywhere," she said. "It wasn't until later that we found out there were bodies under there as well."

The city says it doesn't know how to contact the owner of Building 333. A representative of the landlord who collects rent hasn't been around since the cave-in, the tenants say. A reporter's efforts to reach the owner of Building 333 weren't successful.

After the front of the building collapsed, firemen asked everyone in the building to leave. They cut off the water, but tenants paid neighborhood boys to deliver water in buckets from a public tap. When deprived of electricity, tenants used candles to light their apartments. They ignored threats of arrest.

But at a meeting on May 20, in Mr. Sojatwala's spacious apartment, signs of strain had begun to show. Tempers flared as the renters, most of them over the age of 60, sweated in the dark. They shouted that the landlord and the city were at fault because part of the building hadn't been reinforced, and the goldsmiths weren't kicked out.

Earlier in the month, the renters decided to hire a contractor to prove that their part of the building was still sound. But a few days later, five truckloads of police showed up. Tenants were told to pack quickly. Then, under a government order, their apartments were padlocked.

Locked out, residents of Building 333 quickly regrouped. They turned the building's veranda into a communal home, bathing with buckets of water and cooking with propane. Mrs. Sojatwala dragged out a phone line so she could make calls.

"The entire building is united," she said, sitting amid her kitchen utensils and pails of rice. "This part of the building is still standing."

--Binny Sabharwal contributed to this article.

Write to Eric Bellman at eric.bellman@awsj.com1

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