Model Tenancy Act approved: Here’s what the industry thinks
Real Estate

Model Tenancy Act approved: Here’s what the industry thinks

The Union Cabinet, chaired by the Prime Minister Narendra Modi, has approved the Model Tenancy Act for circulation to all States and Union Territories for adaptation by way of enacting fresh legislation or amending existing rental laws suitably. The Act whose first draft was released in 2019, was approved today, 2 June 2021.

According to the government this Act will help overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth.

The Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country. The Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market and aims to cater to the needs of both tenants and landlords. The Model Tenancy Act will facilitate unlocking of vacant houses for rental housing purposes.

Some important provisions of the Model Tenancy Act are as follows:

  • The Act mentions establishing an rental authority to regulate renting of premises keeping in mind the interest of both parties. The committee will also be responsible for the speedy resolution of disputes.
  • The Model Tenancy Act brings in the provision of standardised security deposit, as opposed to the existing unstandardised method where different cities have different security deposit rules. The Act states that the security deposit cannot be more than 2 months for residential property and 6 months for non-residential premises.
  • The Act outlines the terms of vacation as well. In case the landlord has done everything as per stated in agreement i.e. given the right notice period, and the tenant still fails to vacate in time then the landlord has the authority to charge double the rent till the tenant vacates.
  • The Act permits the landlord to go visit the rented property at any time provided he/she has given some sort of notice/intimation to the existing tenant at least 24 hours prior to visit.

CW sought reactions from Industry leaders on what they had to say in response to the Model Tenancy Act being passed, and here’s what we have:

Ramesh Nair, real estate industry veteran and former CEO, JLL India

“Housing for all cannot be successful without a robust rental housing model. The Act will help reduce slums and also improve the quality of housing in the country if well implemented. All efforts of previous governments have focussed only on the ownership of housing. A robust implementation can also help attract FDI given the current interest levels of global real estate funds towards “beds” (residential rental) and “sheds” (warehousing).”

Niranjan Hiranandani, National President, NAREDCO

“The Model Tenancy Act will facilitate unlocking of vacant houses for rental housing purposes. It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage. The Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market.

Industry bodies like NAREDCO have been requesting authorities for a Model Tenancy Act which would create a vibrant, sustainable and inclusive rental housing market in the country. This Model Tenancy Act will ensure creation of new rental housing stock for all the income groups, addressing the challenge being faced by home seekers.

There was a need for a new law, which would make things easier for all stakeholders – tenants, landlords and investors – to transact and deal in rental housing. The Union Cabinet, has approved the Model Tenancy Act for circulation to all States / Union Territories for adaptation by way of enacting fresh legislation or amending existing rental laws suitably. This will help overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth.”

Shishir Baijal, Chairman & Managing Director, Knight Frank India

“In the recent past, a spate of policy reforms in quick succession have accelerated the development of Indian real estate sector into a more mature and organised sector. Laws relating to RERA, REIT, GST and now Tenancy will aid the property sector’s transformation into a more transparent and consumer focused one; and thereby attract the world’s best institutional investors and developers for greater participation in the country’s realty sector.

While tenancy in the commercial real estate segment has been a well-established tenet of the market model, the fractured landlord tenant relationship in case of housing segment has discouraged development of market model and obstructed institutionalisation of a rental housing market. The Model Tenancy Act has provisions to regulate the rights and duties of both the landlord and tenant and this shall balance the scale between both these counter parties. We believe this law is a step in the right direction and are glad to see that in just under two years since the introduction of model law, and amidst the pandemic, this will become a ground reality.”

Mani Rangarajan, Group COO, Housing.com, Makaan.com & PropTiger.com

“India’s urban population has to unfortunately struggle to find decent rented accommodation even as millions of properties lie vacant across major markets. The Model Tenancy Act 2019 proposes to establish a Rent Authority for regulating the renting of premises in an efficient and transparent manner and to balance the interests of the owner and tenant by establishing an adjudicating mechanism for speedy dispute redressal and to establish Rent Court and Rent Tribunal to hear appeals and for matters connected therewith or incidental thereto.

It will be able to change this paradoxical situation. Provisions announced in the model law would make renting a viable option for tenants as well as property owners, if states show the willingness to adopt it in letter and spirit.”

Rohit Poddar, Managing Director, Poddar Housing and Development Ltd

“The approved Model Tenancy Act (MTA) will help to regulate and promote rental housing in the country and will play a crucial role in increasing the supply of rental homes, which in coming times, will be an essential requirement with rising population. The Act will help in building a better tenancy market. The terms and conditions of the rental tenancy are clear to both landlords and tenants and reduce a significant number of disputes that take place due to unwritten agreements, thus the move will benefit both the landlords and tenants by creating a cohesive and sustainable environment. The approved framework will boost the overall rental housing market in India.”

Pankaj Bhansali, COO, Eqaro Guarantees Pvt Ltd

“The Cabinet approval for the Model Tenancy Act will provide the much-required boost to rental housing in India. The move will help address the high number of vacant residential units in India, which is over 11 million houses, making it economically productive, reducing litigation, and encouraging trust between the landlord and the tenants. The new model Tenancy act will also encourage and attract institutional investments into the residential assets

Rental bonds coupled with the new act will provide the much-needed ease of renting the houses for landlords. Rental Bonds and the provisions of the model tenancy act will help address the friction points in the tenancy process, thus promoting trust between the landlord and the tenant. The new act would bring in over 11 million urban houses into the rental market and help address the country's massive housing shortage.

We expect states to act swiftly and adopt the law, have the necessary regulatory structure in the form of state tribunals to adjudicate on the required matters and provide a common framework across the country. The rental yield in India is amongst the lowest in the world. The Act once adopted and enforced by states promises to create a sustainable and inclusive rental housing market in the country. Like the RERA law, the Model Tenancy Act will reform the rental housing business in India with utmost transparency.”

Manju Yagnik, Vice-Chairperson (Nahar Group), and Sr VP NAREDCO

“Model Tenancy 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. It will help in creating a suitable market for renting properties with no place for ambiguity. The act ensures speedy redressal of disputes with the formation of a separate Rent Court and Rent Tribunal to hear appeals for matters connected to rental housing. In times to come this act will result in increased supply of rental housing benefitting all those seeking to migrate for job opportunities to urban setup with increased availability of needed accommodation.”

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