‘New tenancy law will build trust’

Industry says the Model Tenancy Act will fuel the rental housing market by attracting more investors

Hyderabad: The Union Cabinet this week approved the Model Tenancy Act, which aims to bring reforms to unlock over one crore vacant houses and address the trust deficit between landlords and tenants.

The Act emphasises on setting up separate rent authorities, courts and tribunals in every district to ensure speedy dispute resolution and establishing a mechanism to revise rents to protect tenants against arbitrary hikes while also ensuring owners’ economic interests. It tries to strike a balance between the interests of both owners and tenants.

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It aims to enable the institutionalisation of rental housing by shifting it towards the formal market and give a fillip to private participation in rental housing as a business model for addressing the massive housing shortage. It mandates for written agreement for all new tenancies, which will have to be submitted to the concerned district ‘Rent Authority’. This means that rent and duration of tenancy will be fixed by mutual consent of both the parties.

The Act further provides three months’ notice to tenants for a hike in rentals to ensure owners are enabled to extract the market price for their properties while also ensuring that tenants get enough notice time. It puts a ceiling on security deposits for residential properties, particularly witnessed in cities such as Mumbai (and other parts of Maharashtra) and Bengaluru, which often goes up to 6-12 months.

What industry says?

When asked what impact the Act will make on the housing sector, Rakesh Reddy, director, Aparna Constructions & Estates, told Telangana Today, “Anything that helps standardise the real estate sector is good. The sector is largely fragmented. The Act will give tenants and owners equal rights. It is a positive move.”

This will benefit both the general rental sector as well as segments such as the student accommodation. The intention is good, one has to see how all the States will implement it, he added.

According to Anuj Puri, chairman, Anarock Property Consultants, “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.”

Puri added, “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. Once implemented in all fairness across States, 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.”

Dr Niranjan Hiranandani, president, Naredco, opines, “This Act will ensure creation of new rental housing stock for all the income groups, addressing the challenge being faced by home seekers. This will help overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth.”

On the past market scenario, Knight Frank India CMD Shishir Baijal, observed, “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.”

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