1. What Is Pugree?
Pugree (also written as Pagdi, Pagri, or Pugdi) is a lump sum payment made by a tenant to a landlord at the start of a tenancy — in exchange for the right to occupy the property, often for a very long period.
It is one of India’s oldest tenancy arrangements — and it works very differently from a regular security deposit.
In a standard rental, you pay a refundable deposit and monthly rent. In a Pugree arrangement, you pay a large upfront amount to the landlord and then pay a very low monthly rent — often a fraction of the market rate — sometimes for decades.
2. Pugree vs Regular Security Deposit
Most people confuse Pugree with a normal security deposit. They are very different.
| Aspect | Regular Security Deposit | Pugree |
| Amount | Typically 2–3 months rent | Large lump sum — often lakhs |
| Rent after payment | Market rate | Very low — often frozen for decades |
| Refundable? | Yes — returned when you vacate | Partially — returned by the next tenant, not the landlord |
| Tenancy duration | Fixed term | Long-term, sometimes lifelong |
| Transfer rights | No right to transfer | Tenant can transfer tenancy — with landlord’s share |
| Ownership | No ownership interest | Quasi-ownership — strong tenant rights |
3. How the Pugree (Pagdi) System Works
In a Pugree arrangement, the tenant pays the landlord a large upfront sum — the Pugree amount — and moves in at a very low monthly rent.
The tenant cannot be easily evicted as long as rent is paid. The tenancy can be passed on to legal heirs, like ancestral property.
If the tenant wants to exit and transfer the tenancy to someone else, the new tenant pays Pugree to the outgoing tenant. But the landlord takes a share of that Pugree — typically 33% to 50%, depending on the agreement and state law.
In Mumbai, rents in Pagdi buildings are often frozen at historical rates — sometimes as low as ₹200 to ₹500 per month for large apartments in prime areas, because the rent was fixed decades ago and never revised.
4. Where Is Pugree Most Common?
The Pugree system is most prevalent in Mumbai, particularly in older buildings built before the 1960s.
It emerged during the British era as a way to manage housing scarcity in cities. When the Bombay Rent Act froze rents at artificially low levels, landlords started charging Pugree upfront to compensate for the low ongoing income.
The system is also found in Delhi (under the Delhi Rent Control Act, 1958) and in some parts of Kolkata and Pune — though Mumbai remains its stronghold.
5. Legal Status of Pugree in India
The legal status of Pugree has been debated in Indian courts for decades.
Under the Bombay Rent Act, 1947, accepting Pugree was considered illegal — it was seen as a way to circumvent rent control protections. Landlords who accepted Pugree could face penalties.
The Maharashtra Rent Control Act, 1999, changed this. It legalised Pugree — calling it a premium or fine — and brought it within a formal legal framework. Under Section 56 of the Maharashtra Rent Control Act, Pugree is now a recognised and legal payment.
The Transfer of Property Act, 1882, also supports this — Section 105 allows a lease to be granted in consideration of a price paid or promised, separate from periodic rent. Courts have confirmed that this “price” is essentially Pugree.
The Supreme Court of India has defined Pugree contextually — primarily as a tenancy premium that represents goodwill or the price of the right to occupy — rather than a returnable deposit.
6. Pugree and Redevelopment
Pugree properties — particularly old Pagdi buildings in Mumbai — have become central to redevelopment conversations.
When a Pagdi building is redeveloped, Pugree tenants have specific rights:
Alternate accommodation — the tenant is entitled to a new unit in the redeveloped building, typically of a minimum carpet area as per DCPR norms.
Ownership rights — in many redevelopment agreements, Pugree tenants receive full ownership of their new unit — converting their long-standing tenancy into actual ownership for the first time.
Transit rent or temporary housing — during construction, tenants receive monthly rent support or transit accommodation.
This is why old Pagdi buildings in South Mumbai have become extremely attractive redevelopment targets — the underlying land value is immense, and developers negotiate with both the landlord and the Pugree tenants to unlock it.
7. Rights of a Pugree Tenant
A Pugree tenant has significantly stronger rights than an ordinary tenant.
Under the Maharashtra Rent Control Act and judicial precedent, a Pugree tenant can:
Stay indefinitely — as long as rent is paid, the landlord cannot evict without a valid legal ground.
Pass the tenancy to heirs — Pugree tenancy is inheritable. Legal heirs can continue occupying the property after the original tenant’s death.
Transfer tenancy — with the landlord’s consent, the tenant can transfer their tenancy rights to a new tenant. The landlord receives their share of the Pugree paid by the incoming tenant.
Sublet — in some cases, the tenant may sublet, though the landlord typically receives a share of the subletting arrangement.
8. Risks in the Pugree System
The Pugree system comes with significant risks for both sides.
For the tenant:
- You never become the legal owner of the property
- If the building is demolished or declared dangerous, tenancy rights become complicated
- The landlord’s share on transfer reduces your exit value
- In states without clear Pugree regulations, legal protection is weaker
For the landlord:
- Rent remains frozen at historical levels — often far below market rates
- Eviction is extremely difficult, even for valid reasons
- The property effectively becomes long-term controlled accommodation with very low income
9. Pugree vs Ownership — The Critical Difference
This is the most important thing to understand about Pugree.
A Pugree tenant does not own the property. They have strong, often near-permanent tenancy rights — but not legal title.
The landlord continues to hold ownership. The tenant cannot sell the property outright, cannot mortgage it for a bank loan, and cannot carry out major structural changes without the landlord’s consent.
When a Pugree tenant transfers their tenancy, they are selling their tenancy rights — not the property itself. The landlord continues as the legal owner throughout.
10. Tips for Tenants and Landlords
- Always document the Pugree arrangement in a registered agreement — A verbal or unregistered Pugree arrangement is legally weak. Get it in writing, clearly stating the Pugree amount, rent, transfer conditions, and landlord’s share on exit.
- Understand exactly what rights the Pugree gives you — Pugree gives tenancy rights — not ownership. Before paying a large Pugree amount, know clearly what you can and cannot do with the property.
- Verify the landlord’s legal title before paying Pugree — Pay Pugree only to the actual owner of the property. Verify the registered title documents and the Encumbrance Certificate before paying.
- Pugree tenants in redevelopment — engage a lawyer — When a Pagdi building goes into redevelopment, the agreement between the developer, landlord, and tenants determines what you receive. Do not sign any redevelopment consent without independent legal advice.
- Landlords — document the Pugree and landlord share clearly — When a Pugree tenant transfers their tenancy, your share of the incoming Pugree must be clearly defined upfront. Ambiguity here leads to disputes.
11. Common Mistakes to Avoid
Assuming Pugree gives you ownership
The most common mistake. Paying Pugree — however large the amount — does not make you the legal owner. You have strong tenancy rights, but the landlord holds title. You cannot sell, mortgage, or do major construction without their consent.
Paying Pugree without a written agreement
Many Pugree arrangements are made informally, based on trust. Without a written, registered agreement, your rights — including your share on transfer — have no documented basis. In a dispute, you have little to stand on.
Not verifying the landlord’s title before paying
Some people pay Pugree to someone who is not the actual owner, or is only one of multiple co-owners. Always verify the registered title before paying a large Pugree amount.
Not understanding the landlord’s share on exit
When you transfer your Pugree tenancy, the landlord takes a percentage of the incoming Pugree — often 33% to 50%. Many tenants are surprised by this at exit. Know this number upfront and document it clearly.
Ignoring Pugree tenants in a property purchase
Buyers who purchase a building with existing Pugree tenants often underestimate the complexity. Pugree tenants cannot be easily evicted. Their rights transfer with the building. Always identify and assess Pugree tenancies before purchasing any older property.
12. A Simple Example
Ramesh pays ₹8 lakh as Pugree to a landlord for a 2BHK in a South Mumbai building in 1995. His monthly rent is ₹400. Over 25 years, the area’s market rent rises to ₹45,000 per month — but Ramesh continues paying ₹400.
In 2022, Ramesh wants to exit. He finds a new tenant willing to pay ₹15 lakh as Pugree for his tenancy rights. The landlord’s share — agreed at 33% — amounts to ₹5 lakh. Ramesh receives ₹10 lakh.
Ramesh effectively got 25 years of below-market accommodation plus a ₹10 lakh exit — but he never owned the flat. The landlord received almost nothing in rent for 25 years, but recovered value through the Pugree share on transfer.
The Pugree system created benefits and constraints for both sides, which is exactly why it is both widely used and widely debated.
13. FAQs
What is Pugree in real estate?
Pugree (also Pagdi or Pagri) is a large lump sum payment made by a tenant to a landlord at the start of a tenancy, in exchange for the right to occupy the property long-term at very low monthly rent. It is most common in older buildings in Mumbai and is governed by the Maharashtra Rent Control Act, 1999.
Is Pugree refundable?
Not directly from the landlord. When a Pugree tenant exits, the incoming tenant pays Pugree to the outgoing tenant — the landlord takes their pre-agreed share of this amount. The original landlord does not return the Pugree directly.
Does Pugree give ownership rights?
No. Pugree gives strong tenancy rights — including long-term occupation, inheritance, and limited transfer — but not legal ownership. The landlord retains title throughout.
Is Pugree legal in India?
Yes — under the Maharashtra Rent Control Act, 1999, Pugree is a recognised and legal payment. Under the Transfer of Property Act, 1882, courts have also confirmed its validity as a lease premium. However, its legal standing varies by state and the governing rent control law.
What happens to Pugree tenants in a redevelopment?
Pugree tenants in a redeveloped building are typically entitled to a new unit in the redeveloped structure, transit accommodation or rent during construction, and — in many cases — full ownership of their new unit. The exact terms are negotiated in the redevelopment agreement.
What is the difference between a Pugree and a security deposit?
A regular security deposit is a small refundable amount held for the lease term. Pugree is a large upfront payment that grants long-term or lifelong tenancy rights at very low rent — it is not a deposit but a tenancy premium.
In Simple Words,Pugree is the price you pay for a long-term home, not for ownership. It gives you strong rights to stay, inherit, and even transfer the tenancy — but the landlord remains the legal owner throughout. Before entering any Pugree arrangement, understand exactly what rights you are getting, document everything in a registered agreement, and know your landlord’s share when you eventually exit. What looks like a great deal on day one can get complicated without clear documentation.