The union cabinet, on June 2, 2021, approved the draft model tenancy law, in a move that is likely to revive India’s rental housing market by effectuating a multitude of reforms.
“Model Tenancy Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market. It is expected to give a fillip to private participation in rental housing as a business model, for addressing the huge housing shortage,” the Housing Ministry said, in a statement.
The government-approved draft that was proposed in 2019, will now be circulated to states, for them to make tenancy laws in line with the central version or amend existing laws to make it compliant to the model tenancy law.
Apart from rental housing, the draft law will also promote growth of investment in the sector and give a boost to entrepreneurial opportunities and innovative mechanisms of sharing of space. The law will be applicable prospectively and will not affect existing tenancies.
The government expects that the Model Tenancy Act will facilitate unlocking of vacant houses in India’s key housing markets. It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage.
In March 2021, housing secretary Durga Shanker Mishra had said that the Housing Ministry was likely to present the draft law to the union cabinet ‘in a month or so’, for its approval.
“We have received no comments from some states (on the draft act). We are analysing the responses we have received from some other states. We are in the process and we should be taking the draft law to the union cabinet for approval, in a month or so. By March, it should be through,” the housing secretary said, during a press conference on January 11, 2021.
As the government pursues its ambitious dream to provide ‘Housing for All by 2022’, it unveiled a draft tenancy law, in order to boost supply in the rental housing segment. The Model Tenancy Act 2019 aims to make renting more lucrative for both, landlords and tenants, by plugging the many gaps that currently exist in policies regulating the rental housing segment.
Addressing a three-day virtual Real Estate and Infrastructure Investors’ Summit organised by industry body NAREDCO, housing secretary Durga Shanker Mishra, on November 25, 2020, said the new Act would release over one crore vacant houses locked in the clutches of the old Act and promote investments into the real estate sector, once it is implemented across states. “This will bring a new wave of affordable rental housing”, he said.
The draft model tenancy act may soon become a law, as the centre has told states and other stakeholders that they have time till October 31, 2020, to send their suggestions on the policy document. Meanwhile, the Chandigarh union territory administration has already started the process to implement the model act and has also sought objections from the public for the same, till October 31, 2020.
Note here that despite the tax benefits offered on rent payment, there were 11.1 million vacant homes in urban India in 2011 because of serious loopholes in policies even as the migrant population struggled to find decent accommodation. Considering that developers are sitting on huge unsold inventory in major cities of the country at present, the number of vacant homes in urban areas would have risen dramatically, between 2011 and now.
Let us scrutinise how the Model Tenancy Act 2019 aims to fix this problem, so that the demand-supply gap is bridged.
