Now that the NDA government has finally started pushing for the Draft Model Tenancy Act 2015, the rental market has reason to cheer. If the Act comes through, there will be significant changes made to the almost archaic Rent Control Act 1948, after almost 70 years.
The Act was initiated by the previous UPA government four years ago, but the work on the draft has remained incomplete. At present, tenants go through a harrowing experience of either giving in to arbitrary rent hikes or facing eviction. Since land is a subject that comes under the State List, the Act need not be mandatorily implemented in all States. However, the Act can prove beneficial in the long run for both landlords and the tenants, and bring in much-needed transparency to tenancy laws, and it would be good for all States to adopt it.
Why is it needed?
The Draft Model Tenancy Act, 2015, is an improvement on its obsolete predecessor, the Rent Control Act, 1948. It will make things much easier for landlords who were short-changed by the previous law. Property owners have been sceptical about renting out their houses as they fear that their tenants may refuse to vacate on time.
The Rent Control Act was applicable only to tenancy of more than 12 months, it put a cap on rent, and it made it extremely difficult to evict a tenant who did not pay the revised rents, despite having lived on 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 long-drawn legal proceedings.
With these changes, a large number of properties lying vacant can be used to not only generate additional income for home-owners, but also solve the housing problem in the country.
Who benefits?
Apart from being beneficial to landlords, the Draft Model Tenancy Act works well for the tenants as well. As per the draft, a rent ceiling will be fixed in consultation with the State government to avoid arbitrary hikes. Besides this, landlords will not be able to evict tenants 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 is a win-win situation for both landlords and tenants if they play by the rule book.
The impact?
The expected change — an increased willingness on the part of 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 renting out their property without having to worry about tenants vacating on time. A lot will depend on the execution of the rules mentioned in Act to help landlords raise rents and get trouble-making tenants evicted.
The writer is CEO - Residential Services, JLL India
