Topic : Draft Model Tenancy Act, 2019
Topic in Syllabus: General Studies Paper 3: Indian Economy
Recently, the Ministry of Housing and Urban Affairs has drafted a ‘Model Tenancy Act’ (MTA), 2019..It envisages to balance the interest and rights of both the owner and tenant and to create an accountable and transparent ecosystem for renting the premises in disciplined and efficient manner.
What is Tenancy law?
The Model Tenancy Act governs the regulation of rent and balance of rights between landlords and tenants. It establishes a framework to adjudicate disputes and matters that arise between the two parties faster. The Act covers all residential and non-residential properties.
- MTA stipulates a robust grievance redressal mechanism comprising of Rent Authority, Rent Court and Rent Tribunal.
- Landlords will also be able to charge rents that are to be decided by the respective state governments, on par with market rates.
- Also, It has been proposed to cap the security deposit equal to a maximum of two month’s rent in case of residential properties and, a minimum of one month’s rent in case of non-residential property.
- After coming into force of this Act, no person shall let or take on rent any premises except by an agreement in writing.
- The Model Act provides for its applicability for the whole of the State i.e. urban as well as rural areas in the State.
- It will be mandatory for both the landlord and the tenant to inform the rent authority after getting into an agreement.
- This will ensure that a landlord does not arbitrarily increase the rent in variance with what has been agreed to in the agreement.
- It will also ensure that the tenant is not evicted at the whim of the landlord
- A digital platform will be set up in the local vernacular language of the State for submitting tenancy agreement and other documents.
- This MTA will be applicable prospectively and will not affect the existing tenancies.
Significance of the draft Model tenancy act
- It is expected to give a fillip to private participation in rental housing for addressing the huge housing shortage across the country.
- It will enable creation of adequate rental housing stock for various income segments of society including migrants, formal and informal sector workers, professionals, students etc. and increase access to quality rented accommodation, enable gradual formalization of rental housing market.
- The move could provide relief for both tenants and landlords and help take some load off India’s overburdened litigation process.
- As per Census 2011, nearly 1.1 crore houses were lying vacant in the country and making these houses available on rent will complement the vision of ‘Housing for All’ by 2022.
- The draft seeks to unlock the potential of the vacant houses In India, by bringing transparency and accountability in the existing system of renting of premises and to balance the interests of both the property owner and tenant in a judicious manner.
- Rental housing lucrative proposition for REITs and FDI
- The Rental Housing can gain traction with a conducive policy framework which shall attract corporate players to provide serviced apartments for their employees. It also gives a lucrative proposition for REITS and Foreign Direct Investments players with steady income as well as appreciation in the property value
- With emerging young workforce entering in to Indian employment cycle, BFSI & IT sector encourages mobility of its work force to different job centres for newer exploring multiple opportunities. This will encourage new emerging platforms like co-living and student housing in order to provide additional housing to create ready services apartments as a new business model
- Like RERA, the Model Tenancy Act, 2019 may lose its real purpose if states do not follow the basic guidelines and dilute them.
- There is also a dire need for the government to throw policy-backed weight behind rental contract enforcement and property rights
- While the government lays down the basic policies, the exact rules will likely change within each state since land is a state subject. Like we saw in the highly lopsided roll-out of RERA, the Model Tenancy Act, 2019 may lose its real purpose if states do not follow the basic guidelines and dilute them. For this reason, the Model Tenancy Act, 2019 – like RERA – may well become a process rather than an event.
- The cap on the security deposit can become a pain-point for many landlords – in cities like Bangalore, a ten-month security deposit (with some scope for negotiation) was the accepted norm. Also, if a tenant defaults or causes significant damage to a property, a two-months security deposit may not cover the expenses the property owner incurs in repairs.
The Model Tenancy Act, 2019 – like RERA – may well become a process rather than an event, and need several course corrections to reduce regional dilutions before it becomes a force to reckon with.
Does the Centre’s draft Model Tenancy Act helps to bridge demand-supply gap? Justify.