Big fillip to Realty: Govt approves Model Tenancy Act

New Delhi: The Union Cabinet has approved the Model Tenancy Act today. This Act will be circulated to all States and UTs for adoption. The Act aims to overhaul the legal framework for the rental housing market in the country. The Act also aims to unlock many vacant homes for rental purposes.

“The Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country. It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness," the government said in a statement. 

It is likely to attract private companies to participate in rental housing market as a business model for catering to the large housing shortage.

The Model Tenancy Act will take care of aspects like the necessity of having a formal rent agreement, security deposit amount, pace of rent increase every year and reasons for eviction by the landord.

“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 separate Rent Court and Rent Tribunal in every state/UTs to hear appeals for matters connected to rental housing,” Anuj Puri, Chairman – ANAROCK Property Consultants.

“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 institutionalisation of rental housing market. In case of RERA, the central Act helped states like Maharashtra to make MahaRERA successful to a large extent. In similar lines, we may expect Tenancy Acts in states to become more efficient in providing level playing field to both owners and tenants,” said Samantak Das, Chief Economist and Head Research & REIS, JLL.

“While tenancy in commercial real estate segment has been a well-established tenet of the market model, the fractured landlord tenant relationship in case of housing segment has discouraged development of market model and obstructed institutionalisation of a rental housing market. The Model Tenancy Act has provisions to regulate the rights and duties of both the landlord and tenant and this shall balance the scale between both these counter parties. 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 model law, and amidst the pandemic, this will become a ground reality,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.

 “The implementation of the Model Tenancy Act is one of much-required reform in real estate especially when the country has a peculiar problem of housing shortages when lakhs of residential units are vacant across India. The legal comfort to landowners about quick redressal to the problem of overstaying tenant, as well as protection of tenant rights on arbitrary rent increase etc can bring much required institutional investment in the "built to rent residential segment" in India,” said Anuranjan Mohnot Managing Director & CEO, Lumos Alternate Investment Advisors.

“Housing for all cannot be successful without a robust rental housing model. The act will help reduce slums and also improve the quality of housing in the country if well implemented. All efforts of previous governments have focussed only on the ownership of housing. A robust implementation can also help attract FDI given the current interest levels of global real estate funds towards “beds” (residential rental) and “sheds” (warehousing),” said Ramesh Nair, real estate industry veteran and former CEO of JLL India.