Model Tenancy Act: Experts Welcome Move Aimed At Addressing Housing Shortages

With the Union Cabinet giving its nod to the Model Tenancy Act for circulation among states and union territories, housing experts including developers have welcomed the move. The model legislation will facilitate the unlocking of vacant houses for rental purposes. The proposed legislation bats for the creation of a State-wide independent authority for registration of tenancy agreements; creation of separate court for tenancy-related disputes, unlocking of vacant houses for rental purposes, and institutionalizing the rental housing as a separate entity to boost the housing shortages in India.

The housing and urban affairs ministry floated the draft model tenancy bill in 2019. It proposed to establish an independent authority in every state and UT for the registration of tenancy agreements and even a separate court to take up tenancy-related disputes. Other provisions in the Act include limiting the tenant’s advance security deposit to a maximum of two months’ rent and to a maximum of six months for non-residential purposes.

The government has claimed that the Model Tenancy Act will facilitate the unlocking of vacant houses for rental housing. “It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage,” it said.

In his reaction, Dr. Niranjan Hiranandani, National President, NAREDCO said, “The Model Tenancy Act will facilitate the 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."

Hiranandani said the Act will enable the institutionalization 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,” he 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 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,” he concluded.

Shishir Baijal, Chairman & Managing Director, Knight Frank India said the 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. "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 the model law, and amidst the pandemic, this will become a ground reality,” he added,
Anuj Puri, Chairman – ANAROCK Property Consultants said: "India’s States and Union Territories can now accordingly adapt and enact new laws or amend their current rental laws to dovetail with the Act. The Model Tenancy 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."

To ensure speedy redressal of disputes, the Act also proposes to establish a separate Rent Court and Rent Tribunal in every state/UTs to hear appeals for matters connected to rental housing.
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 (especially in COVID-19-like exigencies), said Puri.

"Once implemented in all fairness across states, it will go a long way in formalizing and stabilizing the rental market. It would also revive the fortunes of not just the rental market but the housing sector at large," he added.

However, even while the Model Tenancy Act is a step in the right direction (providing a clear roadmap for states to follow) it will remain to be seen to what extent the states will toe the central government’s line.

Dr. Samantak Das, Chief Economist and Head Research & REIS, JLL said the Model Tenancy Act is going to give a guiding framework to all states to make their respective Tenancy Acts contemporary. "Current Acts will give way to the new ones where uniformity will prevail, and it will give confidence to homeowners for renting out of existing vacant properties. Also, if the states implement the Tenancy Act in true letter and spirit of the Model Act, we will inch towards institutionalization of the rental housing market," he added.

Mani Rangarajan, Group COO, Housing.com, Makaan.com & PropTiger.com said, "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.”