2 min read.Updated: 04 Jun 2021, 01:25 PM ISTLivemint
The Union Cabinet approved the Model Tenancy Act, a move that will help overhaul the legal framework with respect to rental housing across the country.
Prime Minister Narendra Modi's cabinet decision to approve model tenancy law will encourage private sector to develop housing projects for rent purpose and also bring huge stock of vacant flats in rental market if implemented by states in letter and spirit, according to industry players.
The Union Cabinet approved the Model Tenancy Act, a move that will help overhaul the legal framework with respect to rental housing across the country. The Act mandates for written agreement for all new tenancies, which will have to be submitted to concerned district 'Rent Authority'.
According to industry estimates, over 11 million homes are estimated to be vacant across the country and experts believe that these flats would now come into the rental market and help reduce housing shortages. As per the industry experts, the model Act provides three months notice to tenants for hike in rentals and only two months of security deposits for residential properties.
Commenting on the decision, Naredco President Niranjan Hiranandani said: "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 model Act will facilitate unlocking of vacant houses for rental housing purposes, he said. "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," Hiranandani said.
Anarock Chairman Anuj Puri said the new 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.
"This Act can fuel the rental housing supply pipeline by attracting more investors, and more rental housing stock will help students, working professionals and migrant populations to find urban accommodation," he said. Once implemented across states, Puri said 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," he added.
Knight Frank India CMD said the Model Tenancy Act has provisions to regulate the rights and duties of both the landlord and tenant and this would balance the scale between both these counter parties. Amit Agarwal, CEO and cofounder of Bengaluru-based NoBroker, said the shift from an informal to a formal market would protect the interests of tenants as well as owners.
"The act caps the security deposit to the value equivalent to two months of rent amount. As per the act a landowner cannot cut power and water supply in case of disputes," he said. Agarwal said landlords need to provide a three-month notice to tenants. "This measure would go a long way in protecting the rights of a tenant as it regulates the rent hikes that tenants have had to face," he said.