How Model Tenancy Act could make rental housing more attractive for both tenants and landlords?
Model Tenancy Act, 2019 drafts listed the benefits of both- the landlord and the tenant. One of the key highlights of that is that the landlord cannot indulge in a midterm hike in rentals or indulge in withholding or cutting off any essential supplies or services like electricity/water, etc.; which was common in many places as landlord knew there wasn’t any law binding them. On the tenant’s front, a tenant can’t sublet the property unless otherwise discussed and clearly stated. A security deposit in the case of residential property is a minimum of two months and in the case of non-residential is a month.
Due to weak rental contracts in the past, more than 4.8 lakh properties are vacant in Mumbai; while about 3 lakh empty homes are registered in Delhi and Bengaluru. With this draft tenancy act that will change. This will give homeowners more confidence to rent out their property and make money instead of leaving the house vacant.
With people freely moving across the country for work renting houses has been on the rise in the last decade and it is indeed a welcome move by both tenants and landlords to put some legal structure to this movement.
According to the president of NAREDCO (National Real Estate Development Council), Niranjan Hiranandani, this rental housing policy will serve as a lucrative proposition for both real estate investment Trust (REITs) and Foreign Direct Investment (FDI) as it will provide steady income and appreciation in the property value. This throws open many doors for growth in the rental housing sector that the industry is excited about. It will encourage co-living and student housing to provide additional housing for the making of serviced apartments. It will attract not individual landlords, but corporates as well and will turn into a profit-making business model very fast.
However, property consultants point out that the cap put on the security deposit can be a huge pain point for many landlords, especially in cities like Bengaluru where the tenants usually receive 10 months’ rent as a security deposit (open to negotiation). Also, if the property is damaged by the tenant in any way the usual two and half months of deposit may not cover the cost of the repair. The government lay down a basic framework and rules in which this segment operates; more specifications would change based on each state and region also.