The Indian rental market has been demanding a new law to counter the Rent Control Act, 1948, for a long time. Recently, the government has shown interest in passing the Draft Model Tenancy Act, 2015, that will address the difficulties of landlords and tenants.
“The Draft Model Tenancy Act, 2015, is an improvement to its obsolete predecessor, the Rent Control Act, 1948. The latest draft will make things much easier for the landlords who were short-changed by the previous law,” explains Ashwinder Raj Singh, CEO – residential services, JLL India.
“The Rent Control Act, applicable only to tenancy of more than 12 months, had put a cap on rent. It made it extremely difficult to evict a tenant living in the same premises for years, who did not pay the revised rents. The new draft, on the other hand, will ensure that landlords are able to charge market rates for their residential or commercial properties. They can also get the rents revised periodically and get their premises vacated easily, without getting into long-drawn legal proceedings,” Singh continues.
According to experts, the Draft Model Tenancy Act, 2015, tries to establish a structure for the regulation of tenancy for commercial and residential realty. It focuses on balancing the rights and obligation of landlords and tenants, using rental contracts. It also is a directive to register rental contracts with authorities.
Benefits to tenants and landlords
AS Sivaramakrishnan, head – Residential Services India, CBRE South Asia Pvt Ltd, explains, “First and foremost, the act will bring majority of India’s urban rented accommodation into the purview of the formal housing sector, by the registration of rental contracts.” He further adds that, “The act defines period, inheritance, rents payable, obligations of landlord and tenants, among other factors.”
Objectives of the act
- Mutually fixing and revising rent between the landlord and tenant.
- Unlocking existing properties to rent out.
- Addressing repossession issues in rental housing markets.
There is an enormous urban housing shortage in our country, a phenomenon that is only expected to accelerate with the increasing migrant population shift to urban areas. Thus, the Ministry of Housing and Urban Poverty Alleviation (MoHUPA) has been looking for an affordable housing policy that involves a rental housing intervention programme, along with a suitable policy structure. If applied correctly, rental housing can be yet another method of providing housing for India’s urban population. Although the larger focus has traditionally been on homeownership, the significance of rental housing cannot be emphasised enough.
Applicability of the act
“Since land is a subject of the state, this act is not binding on the states and is, therefore, called a draft. It is left to individual states to decide whether to accept it or not,” opines Singh. “In the long run, most states would have to accept it since it is greatly beneficial to tenants. Presently, the rent laws in most states have become archaic. This act can bring transparency as well ease the process of business for both parties,” says Singh.