Model Tenancy Act to transform rental housing in India

The Model Tenancy Act (MTA), piloted by the Ministry of Housing and Urban Affairs, is a welcome step in the right direction for the rental housing sector in India. In a country where nearly 31 per cent of the urban population resides in rental housing, the need to streamline the leasing process and formalize the industry cannot be overstated.

“By enacting the MTA, the government has recognized the changing needs of the society, wherein ‘Housing for All’ does not only mean ownership, but also access to good quality housing as a service,” said Sriram Chitturi, Founding President of the Rental Housing Association of India (RHAI).

Tectonic shift

Traditionally, housing in India has been viewed as a product, with most government and private interventions focusing on home ownership rather than rental housing. However, the changing demographics, socio-economic trends and consumer needs have fuelled the ever-increasing demand for rental housing in the country.

Despite that, capital formation in the rental housing space has been a challenge, chiefly due to outdated rent control laws. More than one crore houses were lying vacant in urban Indian, as per 2011 Census. “Many houses were locked and lying vacant, as owners feared loss of possession, due to the archaic laws. Now, with MTA, we can look forward to the formalization of rental housing in the country,” noted Chitturi, who is counting on India’s high migration and demographic dividend where 65% of the population is under 35 years of age to accelerate the tectonic shift in the real estate industry.

The new Act is expected to bring greater transparency and accountability in the country’s rental housing ecosystem, while balancing the interests of both the property owner and tenant. “We will soon see big changes in the industry with respect to institutional ownership of housing inventory, efficiency in design and infrastructure, standardization, tech-enabled experience from discovery to check out as well as multiple layers of service aided by technology,” affirmed Chitturi.

Nod to co-living

The 2019 MTA draft had prohibited subletting, which meant that no co-living companies would be allowed to exist. RHAI was quick to highlight the inadequacies of the proposed Act and impress upon the authorities the importance of rental management companies in the current ecosystem.

MTA, in its final form, acknowledges the role of residential rental management companies, such as co-living companies, which offer rental housing as a service, and cater to varied segments of the migrant population. “It is a big move to get regulatory clarity for the service we deliver,” admitted Chitturi, who is also the Founder of a co-living start-up named Guesture in Bengaluru.

Given that housing is a state subject, Chitturi plans to work with various state governments to address state-specific needs of the evolving co-living industry. This will aid the rent economy in the real estate sector. The vision is not just to provide living spaces on rent, but to offer rental housing solutions that are technology-enabled and based on sustainable business models to help enhance the quality of the residents’ lives.

Once MTA is implemented by all state governments, experts concur that it will help resolve India’s migrant housing crisis, which was brutally exposed during the Covid-19 pandemic. Good quality, affordable rental housing will also add momentum to the national objective of ‘Housing for All’.

Disclaimer- Brand desk content