NEW DELHI: With states and union territories having the final say in the recently approved Model Tenancy Act (MTA), there is a growing concern that local politics may dilute the essence of the Act, as happened with the Real Estate (Regulation and Development) Act (RERA).
"The success and operational efficiency of the Model Tenancy Act would majorly depend on the implementation across the States and Union Territories...The apprehension that MTA may end up being powerful yet ineffective comes from the fact that the Act is not binding on the states as land and urban development remain state subjects," said Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa of real estate consulting body CBRE.
Ramani Sastri - Chairman & MD of Bengaluru based Sterling Developers said it is a bit early to say that this move will give a fillip to private investment in rental housing as like in the case with RERA, there are chances that few states may choose not to follow guidelines, diluting the essence of this Act.
"It need several course corrections to reduce regional dilutions before it becomes a force to reckon with. Going forward, more incentives to boost rental housing with proper policies will also help the government to further strengthen its Housing for All initiative," added Sastri.
The Union Cabinet on June 2 approved the MTA for circulation to all States/UTs for adaptation by way of enacting fresh legislation or amending existing rental laws suitably. The Act aims to boost rental housing in India, increase private investment in rental projects and reduce litigation. It fixes limits for security deposits, makes paperwork compulsory, provides for a faster dispute resolution by creating a rent authority, a rent court, and a rent tribunal.
According to the 2011 census, more than one crore homes are lying vacant in India.
Anurag Mathur, CEO of Savills India said the Act is the right direction to solve Urban Housing crisis but big changes won't happen overnight. "Finding a decent house in a new city remains a challenge for many. The Act can surely help in improving this aspect," he added.
On private sector's participation in rental segment, Mathur said, "The Model Tenancy Act is expected to further strengthen the ongoing formalisation and institutionalization of the residential segment in the country. The Act lays down contract guidelines for such tenancies and also outlines an effective redressal mechanism, addressing a long running uncomfortable and often litigious relationship. This coupled with the Affordable Rental Housing Complex guidelines released last year, will certainly attract institutional players like pension and sovereign funds eyeing the very large untapped residential market of the country. This could further open up the feasibility of residential REITs in the long term. The regulatory frameworks will also guarantee stable rental yields in the long term, thus providing viable entry options for risk-averse institutional players."