Indian rental housing market yield is at just 1% to 3% whereas the developed markets promise a return of about 7% to 8%. There are at present 1.1 crores ready-to-move-in properties or dwelling units in India that are vacant but not available for rent simply because of the legal rigidities in the rental legislations and the worry of disputes and lack of a quick settlement machinery.

To remove all these bottlenecks the Indian government aims to bring about a new legislation, the Model Tenancy Act 2021 that is going to replace the old Tenancy Act 1958. In developed economies like that of the USA, we see that a substantial population of nearly 50% lives in rented homes right from their birth to death whereas in India there is a reluctance from the tenants to stay in rental accommodation for the whole of their lives. Tenancy is simply a hassle in many instances which makes the dwellers look for their own homes and properties.

Although looking for a new home or owning a home is a great proposition and helps one to increase the value of assets and income but at the same time, India being so highly populated there is a continuous dearth of proper housing, especially in the urban settings. In such a scenario there is a constant lack of proper housing in the urban areas but yet there are about 1.1 crore vacant homes left to be occupied which is not a good indicator for the economy with ample scope of reforms. In these contexts, the Model Tenancy Act 2021 seems to bring new hope to the Indian rental market making it more organized with quick resolution of disputes and regularizing the returns.

Despite its positive sides, there are questions in the mind of many like, why is there a need for the new legislation, what protection will it give to the tenants and landlords, to what extent would it be able to mobilize the rental housing markets and would it be able to quicken the resolution of disputes and so on. These are the questions we have dealt with in this article that would be of interest to both the owners and the landlords in which category all of us fall. Let’s have a look!

Protection to the landlords 

• Tenants cannot sub-let a property to anyone else
• There are heavy penalties according to the act if they refuse to vacate the property or refuse to pay rent
• On not vacating the premises, the tenant would get an extension of six months period on the same agreement terms
• After such a period of extension, the tenant would have to pay double the rent for two months and after that four times the rent

Protection of Tenants under the Act  

• Maximum security deposit can be of the amount of two months of rent for residential properties and six months for commercial property
• Rent cannot be increased during the agreement period unless it is so stated in the agreement
• In case the property owner wants to increase the rent in the middle of the agreement period, he or she has to give a three-month prior notice to the tenant for such rental increment
• Under no circumstances a landlord can withhold the basic amenities like electricity or water
• Tenants cannot be evicted unless agreed by both parties in writing
• In case of force majeure, the tenants should be allowed to stay for an additional month

Dispute settlement mechanism under the Model Tenancy Act 2021

• Separate rent resolution mechanism with rental authorities, courts and tribunals at every district level for a quick resolution to rental disputes
• The timelines for the resolution of the disputes like withholding essential services, revision of rent, contravention by the property managers, etc. are stipulated
• Minute details like assigning responsibility for structural repairs, routine maintenance, maximum security deposit, etc. should be stipulated in the rental agreement
• Registration of the rental agreement between the tenant and landlord would require the Aadhar no. to be submitted

Other Key Provisions according to the MTA 2021

• A written agreement of tenancy duly registered is mandatory between the landlord and the tenant
• The Act would establish a separate independent authority in every state and Union Territory for registration of tenancy agreements and a separate court would be established to deal with tenancy disputes
• The landlord will be responsible for structural repairs, whitewashing, painting of doors and windows and other such activities
• The tenants would be responsible for other maintenance work like switch and socket repairs, cleaning of drains, kitchen fixture repairs, replacement of glass panel in windows and doors and maintenance of gardens among others.
• The landlord has to give a 24-hour prior notice to enter the rented premises for carrying out any repairs or replacement work
• The rules will be applicable for all tenants let out for commercial, residential or educational use but not for industrial usage
• This act would not cover the leasing agreements for hotels, inns, or lodging accommodations
• The provisions of the MTA would be enforced prospectively and not retrospectively and would not affect the existing tenancies

The bottom-line          
Although all the sectors of the economy and the experts welcome this move of the government as this will affect all our lives in some way or the other, there are debating points and contradictions among the stakeholders of various categories. The experts feel that this would undoubtedly go a long way in regularizing the rental markets of India, especially the urban pockets and increase the rental yield and would facilitate the rentals of the vacant property and would help in the vision of “Housing for all” by 2022. At the same time, the experts also feel that too much legislative control is being exercised by stipulating the amount of advance or rental deposits as it would have been more prudent to leave this to the market forces. Whatever may be the bone of contention, there is no doubt that this will help the sector to get more regularized and as tenancy and rental housing is a state subject, much depends on the cooperation of the states in enforcing these newer legislations.