“CALCULATION OF RENT: A STUDY”

SCHOOL OF LAW

MANIPAL UNIVERSITY JAIPUR

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

PRESCRIBED FOR BA. LL.B (HONS.) 8th SEMESTER

UNDER SUPERVISION OF- SUBMITTED BY-

Mrs. Swati Beniwal Mamta

Assistant Professor Reg No- 151301047
B.A. LL.B (Hons)

1
 CERTIFICATE

This is to certify that Ms Mamta student of B.A. LL.B (Hons.) eight semester, School of Law
Manipal University Jaipur has completed the project work entitled “Calculation of Rent: A
Study” under my supervision and guidance.
It is further certifying that the candidate has made sincere efforts for the completion of the
project work.

Supervisor Name
Mrs. Swati Beniwal
Assistant Professor

2
 ACKNOWLEDGEMENT

This is not just a customary acknowledgement of help that I received but a sincere expression
of gratitude to all those who have helped me complete this project and made it seem
apparently more readable than otherwise it would have been.

I am in debt to my faculty advisor Mrs. Swati Beniwal for giving such an interesting
and amazing topic ‘Calculation of Rent: A Study’ and making it seem easy by lucidly
explaining its various aspects. I would like to thank him for guiding me in doing all sorts of
researches, suggestions and having discussions regarding my project topic by devoting his
precious time.
I thank department for providing Library, Computer and Internet facilities. And lastly I
thank my friends and all those persons who have given valuable suggestions pertaining to the
topic and have been a constant source of help and support.

Thanking everyone,

MAMTA

3
 TABLE OF CONTENTS

INTRODUCTION ........................................................................................................................................ 4
DEFINITION OF RENT .............................................................................................................................. 6
PROVISIONS RELATED TO RENT IN RAJASTHAN RENT CONTROL ACT .................................... 7
FAIR RENT .................................................................................................................................................. 9
FORMULA FOR FIXING THE FAIR RENT EXPLAINED ...................................................................... 9
REVISION OF FAIR RENT ALREADY FIXED ..................................................................................... 10
PRACTICE AND PROCEDURE ............................................................................................................... 11

4
 INTRODUCTION

All transactions in Indian real estate sector are governed by various laws enacted by the
Central Government of India and respective State governments. One such law is
the RENTAL LAWS. These laws govern the rental of commercial and residential property
and are necessary to enforce individual civil rights of both landlord and tenant and prevention
of any kind of deceit.

The real estate scene in India is flawed by land market distortions. The most glaring ones
include inflexible zoning, rent and tenancy laws. Zoning laws, rent controls and protected
tenancies have been detrimental to the healthy rental trends in India. They have put a freeze
to land in city centers that could be otherwise made available for new retail outlets and flats.

These laws also gloss over operational inefficiencies and scuttle competition. Tenants
residing could not be evicted for along time and would not surrender their cheap tenancies on
their own volition. The renovation of buildings could hardly happen. One such act favoring
the rental property market in India is the Rent Control Act.

Rent Control Act was an attempt by the Government of India to eliminate the exploitation of
tenants by landlords. Rent legislation tends to providing payment of fair rent to landlords and
protection of tenants against eviction. But the allowances have been very generous and hence
tenants residing in rental properties in India since 1947 continue to pay rents fixed then,
irrespective of inflation and the realty boom.

The Rent Control Act has led to several adverse situations like languishing investment in
rental housing, withdrawing of existing housing stock from the rental market, stagnating
municipal property tax revenue. The rent control along with security of tenure has not given
any encouragement to house owners to renovation their houses and most houses as a result
have a worn out look.

Repeal of the Rent Control Act would lead to construction boom and meet the growing need
for housing and aid employment generation. There will be more rational use of prime
locations and will set off a continuous process of urban renewal.

5
In 1992, the Central Government proposed a model rent control legislation, which was
meant for and circulated to all states. The model Act proposed modification of some of the
existing provisions on inheritance of tenancy and also prescribed a rent level beyond which
rent control could not apply. The New Delhi Rent Control Act that was passed in 1997 was
based on this but failed to be notified due to resistance from traders who are sitting tenants.
Very few states have introduced the model Act.

The new Maharashtra Rent Control Act, Delhi Rent Control Act, Tamil Nadu Rent
Control Act, Karnataka Rent Control Act all has provisions for the dispute among the
landlords and tenants. Each of the State Rent Act provides for fixation of Standard Rent as
well decree for possession and provisions that lay down the satisfaction of the Court.

DEFINITION OF RENT

“Rent is that portion of the produce of earth which is paid to landlord for the use of original
and indestructible powers of the soil.” -Ricardo

“Rent is the income derived from the ownership of land and other free gifts of Nature.” He
further called it ‘Quasi Rent’ which arises on the manmade equipment’s and machines in the
short period and tend to disappear in the long run. – Marshall

“Rent is the price paid for the use of land.” –Prof. Carver

6
PROVISIONS RELATED TO RENT IN RAJASTHAN RENT CONTROL
ACT

4. Rent to be as agreed. - The rent payable for any premises shall, subject to other provisions
of this Act, be such as may be agreed upon between the landlord and the tenant and it shall
not include the charges payable for amenities which may he agreed upon separately; and shall
he payable accordingly.

Revision of Rent

6. Revision of rent in respect of existing tenancies. - (1) Notwithstanding anything contained

in any agreement, where the premises have been let out before the commencement of this
Act, the rent thereof shall be liable to be revised according to the formula indicated below :-
(a) where the premises have been let out prior to 1st January, 1950, it shall he deemed to
have been let out on 1st January, 1950 and the rent payable at that time shall he liable
to be increased at the rate of [5%] per annum and the amount of increase of rent shall
be merged in such rent alter ten years. The amount of rent so arrived at shall again be
liable to he increased at the rate of 5% per annum in similar manner upto the year of
commencement of this Act;

(b) where the premises have been let out on or after 1st January, 1951, the rent payable at
the time of commencement of the tenancy shall be liable to he increased at the rate
of [5%] per annum and the amount of increase of rent shall be merged in such rent
after ten years. The amount of rent so arrived at shall again be liable to be increased at
the rate of [5%] per annum in similar manner upto the year of commencement of this
Act.

[x x x]

(2) Notwithstanding anything contained in Sub-sec. (1), where the period of ten years for
merger of increase of rent under Sub-sec. (1) is not completed upto the year of the
commencement of this Act, the rent at the rate of 5% per annum shall he increased upto the
Near of the commencement of this Act and amount of increase of rent shall he merged in
rent.

7
(3) The rent arrived at according to the formula given in Sub-secs. (1) and (2) shall, after
completion of each year from the year of commencement of this Act, again be liable to be
increased and paid at the rate of 5% per annum and the amount of increase of rent shall he
merged in such rent after ten years. Such tent shall further be liable to he increased at similar
rate and merged in similar manner till the tenancy subsists.
(4) The rent revised as per formula given under Sub-sec. (1) or Sub-sec. (2) shall he payable,
after the commencement of this Act, from the date agreed upon between the landlord and the
tenant or where any petition is filed in a Rent Tribunal, from the date of filing of such
petition.
7. Revision of rent in respect of new tenancies. - In the absence of any agreement to the
contrary, the rent of the premises let out alter the commencement of this Act shall be liable to
he increased at the rate of 5% per annum and the amount of increase of rent shall be merged
in such rent after ten years. Such rent shall further be liable to be increased at the similar rate
and merged in similar manner till the tenancy subsists.
(2) any agreement fur increase of rent in excess of 5% per annum shall he void to that extent.

14. Procedure for revision of rent. - (1) The landlord may seek revision of rent under Sec. 6
or Sec. 7 by submitting it petition before the Rent Tribunal accompanied by affidavits and
documents, if any.
(2) On filing of such petition the Rent Tribunal shall issue notice accompanied by Copies of
petition, affidavits and documents to the opposite party fixing a date not later than thirty days
from the date of issue of notice. The opposite party may file reply, affidavits and documents
after serving the copies of the same on the petitioner, within a period not exceeding thirty
days from the date of service of notice. The service of notice shall be effected through
process server of the Tribunal or Civil Court as well as by registered post, acknowledgment
due. Notice duly served by any of these methods shall be treated as stuff iciest service.
(3) The petitioner may thereafter file rejoinder, if any after serving the copy to the opposite
party, within a period not exceeding fifteen days from the date of service of the reply.
(4) Rent Tribunal shall thereafter fix a date of hearing, which shall not be later than ninety
days from the date of service of notice on the tenant.
(5) The Rent Tribunal, during the course of such hearing, may hold such summary inquiry as
it deems necessary and fix the rent as per formula laid down in Sec. 6 or Sec. 7 and issue a

8
recovery certificate indicating the date from which such rent shall he payable. The petition
shall be disposed of within a period of one hundred and fifty days from the date of service of
notice on the tenant.

FAIR RENT

The expression “Fair Rent” is not defined in the Act. Section 4 only prescribes a method
according to which rent controller can fix the fair rent. Fair rent means the basic rent
increased to certain percentage according to the provisions of the section.1

The rate of rent was agreed between the parties. It has been held that though the rate of the
rent was agreed upon between the tenant and landlord yet it is open to either of the parties to
move the rent controller for fixing the fair rent.2

FORMULA FOR FIXING THE FAIR RENT EXPLAINED

It was held that the basic rent can be increased to 25% of the rise in general level of price
index but this view was held to be not correct and was overruled in Gela Ram v. Sat Pal3. In
case the methodology applied in Bhim Sain's127 case is to be accepted as correct, then each
and every basic rent, irrespective of its rate, was to be increased to the same extent, i.e. by Rs.
82/- in order to fix the fair rent of the demised premises. This certainly is not the true
implication of this sub-section. As a matter of fact, the index number as such has nothing to
do with the rate of rent of a particular premises. As is commonly said, index numbers are
only barometers of economic activity, i.e., if one wants to get an idea as to what is happening
to economy. He has to look to important indices like the index number of industrial
Production. agricultural production, business activity etc. Thus when one has to say that the

1
Karam Chand v. L.R.s of Labh Chand, RLW 2008 (2) Raj 1685.
2
Ram Piari v. Shri Jagan Nath, 1982(1) Rent LR 109 (DB P&H).
3
1988(2) PLR 35.

9
index number of wholesale prices is 112 for September 1987 as compared to September 1986
when it was hundred, it means there is a net increase in the prices of wholesale commodities
to the extent of 12% during the year. This percentage has only to be found out to work out the
percentage by which the basic rent has to be increased in order to fix the fair rent.

Fomula to calculate Fair Rent

Fair Rent = Basic Rent + [.25 x Increase in Price Index] x Basic Rent
100
Fair Rent--Fair rent fixed on the basis of formula laid down by Division Bench in Gela Ram
v. Sat Pal Sharma's4 case.
Formula of calculation for determining the fair rent as per Gela Ram's case:
Basic rent = Rs. 400/-
Wholesale price index during the year 1981, was 278.4
Wholesale price index in the year 1989, (i.e.,) the year preceding the presentation of petition
was 462.2
Difference = 462.2 - 278.4 = 184 (rounded off)
25% of increase i.e., 25% of 184 = 46%
The increase of 46% is to be allowed in respect of rent which is already being paid i.e., 46%
on the basic rent of Rs. 400 = 46 x 400/1 00 = Rs. 184.
Therefore fair rent will be Rs. 400 + Rs. 184 = Rs. 584.129.

REVISION OF FAIR RENT ALREADY FIXED

The application filed by the landlord seeking fixation of fair rent had been filed after the
expiry of five years from the date from which the fair rent had been earlier fixed. Section 5 of
the Act is unambiguous in laying down a ban on the revision of fair rent already fixed under

10
Section 4 of the Act. Thus, Section 5 does not permit any revision in fair rent unless a period
of five years had expired from the previous fixation of fair rent under Section 4 of the Act.
The first proviso to sub-section (1) of Section 5 created an exception to the general rule
whereby revision of the fair rent was allowed in a case where any addition, improvement or
alteration in the building had been carried out by the landlord at the request of the tenant. It
was neither a case of an application prior to the expiry of five years nor a case of any
addition, improvement or alteration in the premises carried out by the landlord. Thus, Section
5 of the Act is found to be not applicable to the case of the respondent-landlord. Appeal
against such re-fixation contrary to provisions of the Act held maintainable. Appellate
Authority directed to decide the appeal on merit.

PRACTICE AND PROCEDURE

Whether an application is made u/s 4 or 5 is to be determined on the basis of the facts and
grounds mentioned therein even if it was not specifically mentioned whether it is under
section 4 or 5 or the section is wrongly mentioned. Landlord sought fixation of fair rent over
and above the fair rent fixed earlier by the rent controller. It was obviously an application for
revision of fair rent under section 5.

11
 BIBLIOGRAPHY

 Land law, R.R. Maurya, 9th edition, lexis Nexis Publication

WEBLIOGRAPHY

 http://www.economicsdiscussion.net/rent/rent-definition-and-types-of-rents/7461
 http://www.bareactslive.com/Raj/rj1007.htm
 http://shodhganga.inflibnet.ac.in/bitstream/10603/75382/10/10_chapter%204.pdf

12