The central government, yesterday, approved the Model Tenancy Act (MTA) for circulation to all States and Union Territories for adoption. The move is aimed at overhauling the legal framework for rental housing across the country, said the Union Housing Ministry in a statement.
Salient features
- A digital platform in the local vernacular language or the language of the State/UT for submitting tenancy agreement and other documents.
- Robust grievance redressal mechanism comprising of rent authority, rent court and rent tribunal to provide fast-track resolution of disputes within 60 days.
- Additionally, the security deposits amount has been fixed for both residential as well as commercial buildings. For residential premises, the deposit will be two months rent, and for commercial it will be six months rent.
The Model Tenancy Act (MTA) was first drafted in 2015 to define this relationship and provide laws that would resolve any disputes arising between the landowner and the tenant.
The benefits
Boost rental housing supply
Paradoxically, while there is an acute housing shortage in India, the vacancy levels of homes have been on the rise. According to the National Census, vacant houses comprised around 12% of the total share of the urban housing stock. These vacant homes in urban areas could feed the rental market across the country. And the Act is likely to facilitate the same.
“The Model Tenancy Act will facilitate the unlocking of vacant houses for rental housing purposes. It is also expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage,” said Niranjan Hiranandani, National President, NAREDCO.
Reiterating the same, Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty, Hon. Secretary, CREDAI MCHI said, “The Act will boost supply in the rental housing segment. It will make renting more lucrative for both, landlords and tenants, by plugging the many gaps that currently exist in policies regulating the rental housing segment. The model tenancy law will eliminate anomalies and give a boost to the real estate sector.”
Also Read: Can Rental Housing Address The Housing Shortage in India?
Make rental housing market more organised
The Model Tenancy Act will bring forth the much-needed reform in the rental housing market in India and make it more organised. Explaining the same, Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE, “It can be expected to ensure increased transparency and trust between landlords and tenants. Post this, the industry can expect a boost in the rental housing segment, with several residential developers and investors expected to participate in this fast-evolving segment.”
Safeguard the interests of both tenants and landlords
The Act will protect the interest of both renters and the landlord. Commenting on this, Anuj Puri, Chairman, ANAROCK Property Consultants said, “The Model Tenancy Act will help bridge the trust deficit between tenants and landlords by clearly delineating their obligations and will eventually help unlock vacant houses across the country.”
Echoing similar views, Manju Yagnik, Vice Chairperson Nahar Group and Senior Vice President NAREDCO West said, “The Act will be a game-changer for sure resulting in increased trust between tenants and landlords giving way for more homes across the country which have been lying vacant for years. And, most importantly, we will see a speedy redressal of disputes with the formation of a separate Rent Court and Rent Tribunal in every state/UTs to hear appeals for matters connected to rental housing.”
Will developers enter this housing segment? Well, according to Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory, “It is up to the developers as to how comfortable they would be to engage in this housing segment as the rental yield that varies anywhere from 2% to 3% may not be lucrative enough for them. Compared to this, the developers pay higher interests on their loans for project development.”
Also Read: India Gears Up to Implement Rental Housing Policy
The way forward
Rental housing in India is currently plagued with multiple problems, and the goal of the new Act is to eliminate or mitigate many of these.
“Once implemented in all fairness across states, it will go a long way in formalising and stabilising the rental market. It would also revive the fortunes of not just the rental market but the housing sector at large,” added Anuj.
However, the effective implementation of the Act will depend on each State as the Act is not a binding one.