New tenancy law in works, may free up 8.8 m units

Seeks balance in rights of house owners & tenants.

With over 11 million housing units lying vacant due to archaic tenancy laws tilted in favour of tenants, the ministry of housing and urban poverty alleviation (HUPA) has come up with a two-pronged strategy to solve the problem.

HUPA wants to push a new model residential tenancy law that would strike a balance between the rights of house owners and tenants. This, officials say, could free up at least 80% of the vacant/locked up housing units, or nearly 8.8 million units. HUPA has created a task force, with wide representations from banking, insurance and housing finance companies, to suggest the way forward once the proposed law comes into effect.

The new legislation spells out creation of an appellate rent tribunal to sort out all housing disputes and mandatory rental agreements drawn in favour of owners.

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?The main aim of this exercise is to identify bottlenecks and hurdles that deter people from renting out their premises,? HUPA minister Ajay Maken told FE. It would be a model tenancy law that would guide the state governments in firming up their own laws, the minister said.

Once the new law comes into force, it would be effective for a period agreed upon by the owner and the tenant, as noted in the lease agreement. Mutual consent of both owner and tenant would be imperative for the extension of tenancy time. A two-month notice from both sides would be necessary, either to revise rent or to extend the rent period. A 15-90 day notice from the owners? side would be necessary under the new law to ask the tenant to vacate the property.

The proposed tenancy norms are also strict on the issue of taking ?security deposits?. As per the proposal, it may be unlawful to charge a security deposit in excess of three times the monthly rent and such a deposit would be refunded to the tenant within one month after vacation.

Under the proposed norms, one set of the original agreement would need to be given to the tenant, apart from receipt on rent paid.

In case the landlord does not accept any rent, the tenant can deposit the same before a rent tribunal, till the tribunal resolves the matter.

?On deposit of the rent, the rent tribunal would investigate and pass an order based on facts of the case…Any rent and charges not withdrawn for five years by any person entitled to withdraw shall be forfeited by the government,? the draft proposal says.

Since rental and tenancy matters come under the jurisdiction of state governments, HUPA has taken the latter on board in these discussions and drafting of the law so that it is accepted and implemented uniformly.

The task force has members from the LIC of India, HDFC, Sebi, Irda and Hudco, apart from the municipal commissioners of Bangalore and Kolkata.

According to HUPA, of the total shortfall of 18.78 million affordable housing units in urban India, over 11 million units are vacant. HUPA officials said the new legal provisions could free up to 55% of the 18.78 million housing units.

HUPA plans to introduce the new rent norms in the monsoon session of Parliament. The move comes despite a turf war with the urban development ministry, which claims jurisdiction over matters dealing with housing and rent laws.

Justifying the involvement of HUPA in this exercise, Maken said: ?There is a need for rationalisation.

The concept of rental houses has not picked up in urban areas even where the shortage is of over 11 million…This will make urban houses more affordable. Apart from this, it will ensure more investments in the rental housing sector.?

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First published on: 02-06-2013 at 01:04 IST