The Ministry of Housing and Urban Affairs has recently come up with the draft Model Tenancy Act 2019, touting it as the biggest reform in the sector post RERA, after the finance minister in her maiden Budget speech stated the need to do away with archaic rental laws. However, the provision that states or UTs could frame new laws or amend existing tenancy reforms will completely dilute its purpose, according to experts.
The government has already sought comments from the public and various stakeholders on the draft and has been getting a mixed response from realtors.“We are seeking comments on this draft from all stakeholders including states. We will approach the Union Cabinet for approval of this model law and then send it to states/UTs,” said Durga Shanker Mishra, secretary, Housing and Urban Affairs, without specifying the timeline. “This will be another major reform after RERA (Real Estate Regulatory Authority). According to the Census 2011, nearly 1.1 crore houses were lying vacant in India and making them available on rent will complement the vision of ‘Housing for All’ by 2022,” Mishra added.
Meanwhile, the rental housing market is worth `1.5 lakh crore and there will be a huge surge in demand post this law. This will give a new platform to realtors and will also help meet the housing demand in the sector, according to government estimates.“The Model Tenancy Act 2019 is a timely act and will certainly help bring many unsold units to the rental market, filling the demand for houses in every segment. We might see some good movement in the rental market after it gets implemented by all states,” said Harinder Singh Hora, managing director, Reach Group.
While industry bodies have welcomed the reform, many realtors are of the opinion that its implementation will be a difficult job. “There are challenges and prevalent practices to be kept in mind so as to avoid hurdles while implementing it. Practices like multiple month’s rents as advance will be difficult to wipe out. The Act and the system have to give assurance to landlords that in case of disputes, the process of solving it will not be taxing,” said Dhiraj Jain, director, Mahagun Group.
“The government has laid down the basic policy and now it is up to states to implement it. Here, we have to see how things are handled because the same happened during the implementation of the RERA. Also, dilution should not happen so that the purpose behind coming up with the Model Tenancy Act 2019 is not defeated,” said Vikas Bhasin, MD, Saya Group.
Meanwhile, many commercial owners are not happy with the draft. “We passed a resolution out-rightly rejecting the proposed Model Tenancy Act lock, stock and barrel. The first reason for rejection is that it has deliberately and on purpose left out thousands of property owners in Delhi and Mumbai who would continue to get pittance as rent for properties in prime commercial areas which were rented out six to eight decades earlier,” said a statement issued by the Committee for the Repeal of Delhi Rent Control Act.
what does the draft law propose?
Draft tenancy law
The Ministry of Housing and Urban Affairs has released a draft Model Tenancy Law 2019 that seeks to unchain the rental housing sector, currently struggling under archaic laws
Landlords cannot seek an amount of more than two month’s rent as a security deposit. This deposit would be returned to the tenant.
The policy states that if a rent agreement is made for a specific period, the landlord cannot increase the rent amount within this period.
The landlord will have to give a written notice three months in advance before revising the rent. Landlords can increase the rent if they have incurred expenditure on account of improvements, additions, or structural alterations which does not include repairs.
The landlord must give the tenant a notice of 24 hours in advance to enter the premises. The visiting time has to fall between7 am and 8 pm.
The responsibility to maintain the premises lies with both the parties. The rent agreement will have to specifically mention who takes care of what in case of damages.
Currently, rent agreements are registered at the sub-registrar’s office. In order to bring transparency, fix accountability and promote fairness in the rental housing segment, the policy proposes setting up of a rent authority.
It also proposes heavy penalties for overstaying. A landowner will be entitled to compensation double that of the monthly rent for two months of overstaying and four times monthly rent after that