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LIC tenants hit the roof

Freny Patel

The 55-year old Khadi Bhandar in Bombay could face closure as landlord Life Insurance Corporation of India has revised the monthly rental from Rs 57,481 to Rs 1.4 million, a jump in excess of 24 times. The revision is with effect from November 2000.

LIC has stirred a hornet's nest, having hiked rentals in line with commercial rates. Tenants occupying premises belonging to LIC have gone into a panic and are taking recourse to legal counsel.

This follows the recent series of notices served by the corporation informing the tenants of the upward revision in rentals. The exercise is meant to increase LIC's returns on real estate from the prevailing 2.8 per cent to at least 7-8 per cent for policyholders.

LIC tenants have set up a committee-the All India LIC Tenants' Action Committee-to protest against the corporation's bulldozing tactics, which are not in keeping with the Maharashtra Rent Control Act.

In its move to hike the "meagre rentals", LIC has taken recourse to the Public Premises Act. Its tenants argue that as they are paying the Maharashtra government repair cess, they ought to be excluded from the purview of the PPA.

It is understood that member of Parliament Manohar Joshi, who happens to be the principal advisor to the tenants' committee, has written to the LIC chairman, GN Bajpai, requesting him to take a more sympathetic stand till the PPA can be amended in favour of the tenants.

Khadi Bhandar occupies 14,242 square feet of space at Khadi Bhavan, in Bombay's Fort area where the municipal tax has risen massively on account of it being an old property built in the 1940s.

With the Maharashtra government having raised the tax on the entire building, LIC chose to jack up the rental to Rs 100 per square foot, thereby transferring the government valuation on the property to another government entity, said SB Mathur, LIC zonal manager (western). "The government has undertaken the valuation by way of taxes and we have passed it on by way of rentals," he said.

"There is no reason why LIC should shell out the increased levy from its own pocket, especially when it negatively impacts returns to our policyholders," Mathur said.

He said: "We have been reactive rather than proactive," considering the massive jump in Bombay municipal tax on old property. For the year just gone by, LIC ended up paying a little less than Rs 10 million for the property in retrospective for the past three years, he added.

However, real estate consultants pointed out that LIC's decision to ask for Rs 100 per square foot is not in line with commercial rates in the area, which currently rule at Rs 80-85 per square foot.

"These old buildings do not even merit such rates considering their depleted state, poor amenities, poor maintenance and hardly any parking facilities. If one were to pay Rs 100 per square foot, one could get better space in Nariman Point," said one leading real estate consultant.

At the same time, LIC is getting as little as Rs 2 per square foot in Warden Road, Bombay, against the market rate of Rs 50. However, LIC has not touched residential tenants except in cases where the address has changed hands.

"We try not to touch them because of the hardship it would cause," said Mathur. He further added that LIC is open to negotiations. Khadi Bhandar is deliberating on whether to negotiate with the corporation or to contest the huge increase in the rent.

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