by Mr. Ashwinder Raj Singh, CEO – Residential
Services, JLL India
A change is in the air
after almost 70 years as far as rental market is concerned. With the Draft
Model Tenancy Act 2015, more of India’s budget-strong families can expect to
have a roof over their heads at a cost that is affordable, and to live with dignity.
The NDA government has
finally started moving on the Draft Model Tenancy Act 2015. The previous UPA
government initiated it almost four years back, but did not complete the
process. Housing is a major problem in India, and this Act looks forward to making
an impact on it in the most constructive manner.
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| Ashwinder Raj Singh, JLL India |
Will this Act will change the market dynamics
and if so, how?
The Draft Model Tenancy
Act, 2015 is an improvement on its obsolete predecessor, the Rent Control Act,
1948. The latest draft will make things much easier for the landlords who were
short-changed by the previous law.
The Rent Control Act was applicable only to
tenancy of more than 12 months, had put a cap on rent and made it extremely
difficult to evict a tenant who did not pay the revised rents despite living in
the same premises for years.
The new draft, on the other hand, will ensure that
landlords are able to charge market rates for their residential or commercial
properties, get the rents revised periodically and also get their premises
vacated easily without getting into the long-drawn legal proceedings.
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What is Draft Model Tenancy Act, 2015 responding
to?
There was a need to unlock
the greater potential of the housing sector. Property owners were sceptical
about giving their house on rent, and most of them avoided it out of the fear
that tenant will never vacate their property.
With these changes, house owners
can relax and a huge number of properties lying vacant can be used to not only
generate additional income for them, but also solve the housing problem of
millions.
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Who will benefit from the new Act?
Apart from the benefits to
landlords, the new draft Act also works well for tenants. As per the draft,
rent ceiling will be fixed in consultation with the state government to avoid
arbitrary hikes. Besides this, landlords won’t be able to evict tenant as per
their whims and fancies, as there will be a written agreement. Also, the
security deposit charged from the tenant will be capped at three times the
monthly rent, which is currently charged more or less on an ad hoc basis.
Another
plus point for tenants is that they can claim a reduction in rent if the
quality of services available to them deteriorates in any way. In short, it’s a
win-win situation for both house owners and tenants if they play by the rule
book.
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Will the new Act succeed where the previous one
failed?
Yes, it will. The new Act
safeguards the interests of both the parties in a special court of law, so
there is no reason to believe that it will fail to have an impact. Landlords
can expect rent that their property deserve and tenants will be saved from unexpected
rental raise and surprise evictions. The only thing to be considered here is
the implementation of the Act in its right spirit.
The purpose of this Act is
to help unlock the pent-up potential lying in the housing segment. While the
UPA government’s avowed intention of constructing houses for millions will take
a lot of time and regulatory approvals, unlocking the doors of houses already
built but not utilized is a faster and comparatively easier process of
addressing the goal of Housing For All.
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Will there be an immediate impact?
The expected change –
meaning the increased willingness for property owners to rent out their
properties – might not happen overnight. House owners will first like to test
the waters.
However, with a long-term view, house owners have everything to
gain by letting out their property without having to worry about seeing them
vacated. A lot will depend on the execution of the rules mentioned in Act to
help landlord raise rents and get trouble-making tenants evicted.
State-Level Applicability
Of The Act
Since land is a subject of
state, this Act is not binding on the states and therefore is called a draft.
It is left on the states to decide whether to accept it or not. Given the
vote-bank scenario, most state governments might not adopt this draft, but in
the long run they would have to accept it since it is beneficial for tenants in
a big way. Presently, the rent laws in most states have become archaic and are
not serving the purpose of the current day and age.
Additionally, lots of
tenants have to undergo the harrowing experience of either giving in to
arbitrary rent hikes or face eviction. This Act can help bring transparency as
well as ease of doing business for both the parties involved.
A change is in the air
after almost 70 years as far as rental market is concerned. With the Draft
Model Tenancy Act 2015, more of India’s budget-strong families can expect to
have a roof over their heads at a cost that is affordable, and to live with
dignity. The sooner the respective state governments adopt the new Rental Act,
the sooner they will be able to reap the benefits.
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