This Act could draw the curtains on landlord-tenant tussles

The Draft Model Tenancy Act, 2015, if accepted, could unlock the doors of huge number of properties that are lying vacant currently, thus providing a solution for India's housing problem. But it is easier said than done.
The Draft proposes several reforms to the earlier Rent Control Act, 1948, which was seen as outdated and partial to tenants.

The new Draft seeks to balance the needs of both tenants and landlords. For instance, as per the provisions of the Rent Control Act, rents of properties were capped and landlords could not raise rents despite the jump in property rates. Thus, many tenants ended up paying a paltry rent of about Rs 100 despite living in prime locations.

The Draft proposes reforms that will enable landlords to charge market rates and make it easier for landlords to evict tenants who default on rent without getting into long drawn out legal proceedings.

This move is expected to give a fillip to the rental housing market. "Earlier, property owners avoided giving their property on rent out of the fear that tenant will never vacate their property. With the proposed 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,'' says Ashwinder Raj Singh, CEO - Residential Services, JLL India.

"There was a need to unlock the greater potential of the housing sector,'' says Ashwinder. Speaking on the impact on property prices, he feels that the move will not bring down property prices. "The landlord can now give the property on rent. He will earn an income on his investment, so there will be an incentive to invest in property,'' he adds.

The Draft also has provisions to protect the interests of the tenants. Currently, the security deposit paid by tenants is an ad-hoc amount. As per the draft, the security deposit cannot exceed three times the monthly rent. Besides, tenants can claim a reduction in rent if the quality of services deteriorates. "It's a win-win situation for both house owners and tenants if they play by the rule book,'' says Ashwinder.

While the Draft permits landlords to raise the rent, the tenants need not fear arbitrary hikes. This is because the Draft has proposed a ceiling on the rent that is to be fixed in consultation with the state government. Besides, landlords cannot evict tenants as per their whims and fancies, but have to follow the terms of a written agreement.

Also, tenants below a certain threshold are protected in that the terms of the Draft are not applicable to these select categories. "Senior citizens who are actual residents, widows and single women, persons released or retired from the armed forces, are among the special categories of persons,'' points out Ashutosh Limaye, national director – research, JLL India.

Among the many reforms included in the Draft is the proposal for an independent authority for registration of all tenancy agreements and a separate court for rent related disputes and litigation cases. The rent agreements need to be registered with the Rent Authority. Further, the Draft has proposed that all disputes will be heard at the Rent Courts set up by the states. The Civil Courts will no longer hear rent related cases.

As land is a state subject, it is up to each state government to decide if they wish to adopt the proposals of the Draft Model Tenancy Act. However, given the resistance of the tenants to any changes in the rent laws and due to vote bank politics, it is unlikely that the proposed Draft will replace the old Rent Control Act in a hurry.