Model Tenancy Act: Here’s how this act will affect the rental real estate scenario in Maharashtra

August 07, 2021 3:29 PM

By Annuj Goel With the motive of opening up the rental housing market of India, the Union Government has recently passed the ‘Model tenancy Act’ 2021. The Model Tenancy Act aims to enforce a transparent ecosystem for renting premises, minimize litigations and reduce tenant-landlord disputes. As Maharashtra boasts of having the highest number of tenancies […]

Model Tenancy ActThe Model Tenancy Act aims to enforce a transparent ecosystem for renting premises, minimize litigations and reduce tenant-landlord disputes. Image: Reuters

By Annuj Goel

With the motive of opening up the rental housing market of India, the Union Government has recently passed the ‘Model tenancy Act’ 2021. The Model Tenancy Act aims to enforce a transparent ecosystem for renting premises, minimize litigations and reduce tenant-landlord disputes. As Maharashtra boasts of having the highest number of tenancies across India, the much-awaited Act will be hugely beneficial for the real estate developers, rental housing investors and existing players.

Heightened NRI investments

Hitherto, in the absence of sound rental and leasing laws and complexities involved in the eviction of unscrupulous tenants, the sophisticated Non-Resident Indians (NRIs) investors stayed away from this sector. However, the Model Tenancy Act will not only control the tenants stay but also empower the landlord with robust laws to govern the terms of tenancy. In the Model act, issues such as subletting, transfer of rent agreement and property damages are dealt with efficiently. It will encourage NRI investors of Maharashtra to convert their properties into productive rent generating assets.

Regulated rental prices

The Model Tenancy Act underscores that the landlord must inform the tenant at least three months before the revision of the rent. The landlords cannot increase the rent single-handedly, as has been the norm till now. It will provide ample time for the tenants to decide and relocate if they do not want to stay further. In cities such as Mumbai, tenants are generally compelled to settle in far-flung areas as the rents are skyrocketing in mainland Mumbai. However, the model Law would unlock the residential inventory lying idle within the city limits and would help the prospective tenants find properties at suitable locations.

Mandatory written agreement

The Model Tenancy Act makes it compulsory to have a written agreement, duly signed by both the parties, that too within two months of the final deal. The contract must enumerate clearly the rent amount, details of revision of rent and its schedule, and the agreed-upon tenancy tenure. To have a smooth tenancy period, the Model Law encourages the parties to clearly mention issues such as conditions regarding maintenance and repair of property during the tenancy and related technicalities. A mandatory written agreement makes it seamless for both parties to adhere to the decided conditions. Essentially, the Model Tenancy Act has minimized the points of friction between a landlord and a tenant and encouraged the new investors to foray into the rental housing domain.

Augmented housing supply

The Model Tenancy Act has certainly reduced the fear and apprehensions of the landlord community. Till now, the landlords and property owners were wary of leasing the premises due to loss of assets, rental delays and forceful stay of the tenants. However, provisions of heavy penalties for overstaying and non-payment of rent will discourage such tenants from erring and complying with the rent agreement religiously.

In case a tenant overstays beyond the decided term, the Model Law compels him/her to compensate the lessor with two months’ rent, which might extend up to four months’ rent in some cases. These provisions will definitely invite the hitherto reluctant property developers and investors and will increase the housing supply manifold.

Establishment of rent courts

Despite written agreements and laid-down procedures, there remains a possibility of tussle. To speedily resolve the landlord-tenant disputes, the Model Act proposes to set up rent courts and tribunals in every State/Union Territory (UT) of India. These measures would boost homeowners and real estate developers’ confidence and encourage them to unlock their properties for rental accommodations. The Act would have an enabling effect towards increasing the rental housing supply across India.

Conclusively, the Model Tenancy Act was much-awaited legislation to regulate the rental housing landscape. It empowers both the tenants and the landlords and encourages new investors to list their unused properties on rent. In case of Maharashtra, the Act will help solve the housing crisis in cities such as Mumbai and provide greater rent-generating avenues for investors.

(Annuj Goel is Chairman & MD Goel Ganga Developments. Views expressed are the author’s own.)

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