Tenancy Act will bridge trust deficit between tenants, landlords
The Union Cabinet gave its green signal to the much-needed Model Tenancy Act indicating its intent on rendering the highly unorganized rental market into an organized one.
The Model Tenancy Act will certainly go a long way in bridging the trust deficit between the tenants and landlords by clearly delineating their obligations and will eventually help unlock vacant houses across the country. And that's not all. If implemented in a robust manner, the new Act, eventually can also help attract FDI given the current interest levels of global real estate funds towards 'beds' (residential rental) and 'sheds' (warehousing). That's what many sector analysts feel.
Mind you that 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.
The Act is expected offer a two-pronged solution: Formalizing the rental market in India and contributing to reduce the housing shortage in the country which in turn aids in the government's mission of Housing for All by 2022. Housing for all can't 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 executed properly. It is bound to make renting more lucrative for both, landlords and tenants, by plugging the many gaps that currently exist in policies regulating the rental housing segment. The model tenancy law will eliminate anomalies and give a boost to the real estate sector. Significantly, 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). Once implemented in all fairness across the country (and that is very important), it will go a long way in formalising and stabilising the rental market. It would also revive the fortunes of not just the rental market but the housing sector at large. Having said all these, what would be interesting and extremely critical to see is: to what extent the States will toe the central government's line.
Otherwise, the Model Tenancy Act would 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, India will inch towards institutionalisation of rental housing market. The residential rental market in India has always been unregulated and has had a history of being unscrupulous. Whether the sector can come out of this, making best use of the new Act, remains to be seen.
