The union cabinet, on June 2, 2021, approved the draft model tenancy law, in a very move that's likely to revive India’s rental housing market by effectuating a large number of reforms. Also, in reference to our blogs articles on the subject, we are proud to published it first on our website in the month of November 2020 & October 2020 respectively - the hot viral news of tenancy rights v/s landlord....
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“Model Tenancy Act will enable institutionalization of rental housing by gradually shifting it towards the formal market. it's expected to allow a fillip to non-public participation in rental housing as a business model, for addressing the massive housing shortage,” the Housing Ministry said, in an exceedingly statement.
The government-approved draft that was proposed in 2019, will now be circulated to states, for them to form tenancy laws in line with the central version or amend existing laws to create it compliant to the model tenancy law. other than rental housing, the draft law will promote growth of investment within the sector and provides a lift to entrepreneurial opportunities and innovative mechanisms of sharing of space. The law are applicable prospectively and can not affect existing tenancies. The government expects that the Model Tenancy Act will facilitate unlocking of vacant houses in India’s key housing markets. it's expected to grant a fillip to non-public participation in rental housing as a business model for addressing the large housing shortage.
In March 2021, housing secretary Durga Shanker Mishra had said that the Housing Ministry was likely to present the draft law to the union cabinet ‘in a month or so’, for its approval.
“We have received no comments from some states (on the draft act). We are analyzing the responses we've received from another states. We are within the process and that we should be taking the draft law to the union cabinet for approval, in a very month around. By March, it should be through,” the housing secretary said, during a conference on January 11, 2021.
As the government pursues its ambitious dream to supply ‘Housing for All by 2022’, it unveiled a draft tenancy law, so as to spice up supply within the rental housing segment. The Model Tenancy Act 2019, aims to create renting more lucrative for both, landlords and tenants, by plugging the various gaps that currently exist in policies regulating the rental housing segment.
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Addressing a three-day virtual property and Infrastructure Investors’ Summit organised by industry body NAREDCO, housing secretary Durga Shanker Mishra, on November 25, 2020, said the new Act would release over one crore vacant houses locked within the clutches of the old Act and promote investments into the REAL estate sector, once it's implemented across states. “This will bring a brand new wave of affordable rental housing”, he said.
The draft model tenancy act may soon become a law, because the centre has told states and other stakeholders that they need time till October 31, 2020, to send their suggestions on the policy document. Meanwhile, the Chandigarh union territory administration has already started the method to implement the model act and has also sought objections from the general public for the identical, till October 31, 2020. Note here that despite the tax benefits offered on rent payment, there have been 11.1 million vacant homes in urban India in 2011 thanks to serious loopholes in policies while the migrant population struggled to seek out decent accommodation. Considering that developers are sitting on huge unsold inventory in major cities of the country at the present, the quantity of vacant homes in urban areas would have risen dramatically, between 2011 and now.
Model Tenancy Act 2019: Key features
The Act has put in situ several measures, by way of tightening regulations and making it lucrative for landlords and tenants, to spice up rental housing.
A ‘Rent Authority’ are going to be established under the Model Tenancy Act 2019
On the lines of the Estate Regulatory Authorities that are founded under the Estate (Regulation and Development) Act, 2016, states could founded rent authorities in cities. After its establishment, landlords and tenants would need to be present before the authority to urge the rent agreement registered. In its part, the authority would founded an internet site, to take care of all the information it receives within the kind of rent agreements.
“No person shall, after the commencement of this Act, let or tackle rent any premises except by an agreement in writing, which shall be told to the rent authority by the owner and tenant jointly, within the form laid out in the primary schedule, within a period of two months from the date of agreement,” reads the policy document.
Rent courts/tribunals to handle disputes under the Model Tenancy Act
In case of any discontent, the contracting parties would first approach the rent authority for an answer. just in case the disputing parties don't seem to be satisfied with the order of the rent authority, they may approach the rent court/tribunal to hunt relief. These courts would must pass an order within 60 days of receiving a complaint.
After the rent courts are founded, civil courts would haven't any jurisdiction over disputes regarding rental housing. ‘Only the rent court and no civil court, shall have jurisdiction, except the jurisdiction of the rent authority under Section 30, to listen to and judge the applications referring to disputes between landlord and tenant’, states the Act.
Model Tenancy Law: Provisions that might help landlords
To discourage overstay of tenants
The policy states that tenants would be vulnerable to pay the landlords double the rent for 2 months and 4 times the rent within the consequent months, just in case they stay after expiry of the rental agreement.
To make eviction of tenants easy
Under the model policy, landlords could approach the rent court requesting eviction, if the tenants fail to pay the rent for 2 months in a very row.
To stop sub-letting by tenants
Without prior permission of the owner, the tenant isn't eligible to sub-let whole or a part of the rented accommodation.
Model Tenancy Law: Provisions that might help tenants
To stop intrusion of the owner
That landlords march into one’s premises as and once they want, could be a common complaint among those living in rented homes. to prevent this from happening, the policy states that landlords must provides a written notice, 24 hours beforehand, to go to the premises. Also, they can not make a visit before 7 am and after 8 pm.
To cap margin demanded by landlords
In cities like Mumbai and Bengaluru, tenants should pay a minimum of a year’s rent, as deposit. Landlords in states that adopt the policy wouldn't be ready to ask quite two months of rent, as a margin.
To regulate increase in rentals by landlords
During the complete rent agreement period, landlords cannot hike the rent, unless something giving them the correct to try and do has been clearly mentioned within the rental agreement. the owner will need to give three months’ notice to the tenant, before increasing the rent.
Landlord accountable for structural maintenance of rented premises
While the policy states that both parties are going to be responsible to keep up the physical health of the rented property, the responsibility of structural maintenance will lie on the owner.
How effective can the Model Tenancy Law be?
However, questions remain over the effectiveness of the model policy, its laudable provisions notwithstanding. Firstly, land may be a state subject and hence, states are un-engaged to accept or reject the model policy, which has been within the works since the prime minister Narendra Modi-led National Democratic Alliance (NDA) first formed the govt. in 2014. because the rules aren't binding, states would hardly be in an exceedingly hurry to embrace it. “Two years after the launch of the Act, states are still busy fitting authorities under the RERA. Barring some, most are still struggling to be told the ropes,” points out Adv. Osama Shaikh, a Thane-based lawyer who specializes in property disputes. “Not many nations would show the willingness to adopt the policy, because it involves a good deal of labor on their part,” Shaikh adds.
Even if states founded the regulatory framework, developers might not be willing to interact during this housing segment, despite the actual fact that they're sitting on a list stock worth Rs 1.13 trillion. this is often because rental yield, which ranges typically between 2%-3% annually, isn't lucrative enough. In contrast, developers should pay interest ranging between 12%-14% on loans for project development. The Model Tenancy Act doesn't address the problem of low rental yields. Hence, one may witness a scenario, where builders could also be reluctant to make houses for the rental segment but may use their inventory stock for rentals.
Model Tenancy Law: Provisions that would help landlords
To discourage overstay of tenants
The policy states that tenants would be susceptible to pay the landlords double the rent for 2 months and 4 times the rent within the consequent months, just in case they stay after expiry of the rental agreement.
To make eviction of tenants easy
Under the model policy, landlords could approach the rent court requesting eviction, if the tenants fail to pay the rent for 2 months during a row.
To stop sub-letting by tenants
Without prior permission of the owner, the tenant isn't eligible to sub-let whole or a part of the rented accommodation.
Model Tenancy Law: Provisions that would help tenants
To stop intrusion of the owner
That landlords march into one’s premises as and once they want, may be a common complaint among those living in rented homes. to prevent this from happening, the policy states that landlords must provides a written notice, 24 hours prior to, to go to the premises. Also, they can not make a visit before 7 am and after 8 pm.
To cap deposit demanded by landlords
In cities like Mumbai and Bengaluru, tenants should pay a minimum of a year’s rent, as down payment. Landlords in states that adopt the policy wouldn't be able to ask over two months of rent, as a margin.
To regulate increase in rentals by landlords
During the whole rent agreement period, landlords cannot hike the rent, unless something giving them the correct to try and do has been clearly mentioned within the rental agreement. the owner will must give three months’ notice to the tenant, before increasing the rent.
Landlord answerable for structural maintenance of rented premises
While the policy states that both parties are responsible to take care of the physical health of the rented property, the responsibility of structural maintenance will lie on the owner.
Model Tenancy Law: Provisions that might help tenants
To stop intrusion of the owner
That landlords march into one’s premises as and once they want, could be a common complaint among those living in rented homes. to prevent this from happening, the policy states that landlords must provides a written notice, 24 hours ahead, to go to the premises. Also, they can not make a visit before 7 am and after 8 pm.
To cap down payment demanded by landlords
In cities like Mumbai and Bengaluru, tenants need to pay a minimum of a year’s rent, as deposit. Landlords in states that adopt the policy wouldn't be ready to ask quite two months of rent, as a margin.
To regulate increase in rentals by landlords
During the whole rent agreement period, landlords cannot hike the rent, unless something giving them the correct to try to to has been clearly mentioned within the rental agreement. the owner will need to give three months’ notice to the tenant, before increasing the rent.
Landlord liable for structural maintenance of rented premises
While the policy states that both parties are going to be responsible to take care of the physical health of the rented property, the responsibility of structural maintenance will lie on the owner.
Even if states founded the regulatory framework, developers might not be willing to interact during this housing segment, despite the very fact that they're sitting on a listing stock worth Rs 1.13 trillion. this is often because rental yield, which ranges typically between 2%-3% annually, isn't lucrative enough. In contrast, developers should pay interest ranging between 12%-14% on loans for project development. The Model Tenancy Act doesn't address the difficulty of low rental yields. Hence, one may witness a scenario, where builders could also be reluctant to make houses for the rental segment but may use their inventory stock for rentals.
#yusufbhandarkar - Ali Construction & Engineers - Real Estate Advisor - Email: multimediastudio9@gmail.com -
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