The Indian Cabinet’s recent approval for the Model Tenancy Act is being hailed as a landmark moment in the country's real estate sector.
In an official statement, the Housing Ministry said that the law, which was first proposed in 2019, will help overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth.
"Aimed at increasing confidence of landlords to rent out their vacant properties, this Act will serve as booster for NRI investments. For an NRI investor, it is a great assurance that the tenant of their property is bound by legal terms. Further, the act defines the timeline within which any rental disputes will be resolved," said Shajai Jacob, MD and Country Head, ApnaComplex and CEO - GCC, ANAROCK Property Consultants.
The recently-approved Model Tenancy Act (MTA) aims to bridge the erstwhile chasm between owners and tenants in the rental sector by streamlining India’s rental landscape and modernising rental laws, a government statement read.
The Act, which is seen as a long-overdue update to the Rent Control Act of 1948, aims to rid the rental sector of arbitrariness by way of formal and written agreements thereby dismissing verbal contracts.
There are two notable changes that have been made in the 2019 policy in terms of a regulatory framework and resolving disputes.
Currently, rent agreements are registered at the sub-registrar’s office. In order to bring transparency, fix accountability and promote fairness in the rental housing segment, the policy proposes setting up of a rent authority.
This is aimed at creating a system for speedy resolution of a dispute. Landlords and tenants will have to approach the rent authority for settlement. In case they are not satisfied with the order of the authority, they can challenge it in the rent court/rent tribunal within 30 days from the date of the order.
“In the areas to which this Act extends, only the rent court and no civil court shall have the jurisdiction to hear and decide the applications relating to disputes between landowner and tenant,” read the policy. Also, the tribunal must settle a dispute within 60 days of filing.
Jacob said that with the regulatory framework for rental homes now also being strengthened and rendered increasingly transparent, it is the perfect time for NRIs to invest in Indian real estate for sustained rental income.
"The new law also calls for a digital platform where tenancy agreements need to be submitted to the rent authority in future. Digital infrastructure is more convenient and brings an added level of transparency for NRI landlords," he added.
As per ANAROCK Research, over 4.22 lakh homes are scheduled for delivery by 2021-end. The Indian government estimates from the past show there are over 1.1 crore fit-for-renting properties that are lying vacant across urban India due to the lack of transparency and slow dispute resolution system.
Implementing the tenancy law can lead to several constructive developments such as uniform legislation across all states; protection of tenant and landlord rights; and a clear demarcation of stakeholder responsibilities and provisions, claimed experts.