Newly drafted Tenancy Law by Central Government is
all set to bring radical changes in Indian Rental market. There will not be a
fear in the minds of Landlords that their property might get grabbed by tenants
and at the same time tenants will also be free from fears like untimely
eviction.
MHUPA(Ministry of Housing and Urban Poverty Alleviation)
has finalized draft of the Model Tenancy Bill, 2015, doing away with some
archaic rules that govern this sector.
An independent authority for registration of all
tenancy agreements and a separate court for resolving disputes, are certain
major points proposed under this law. This will resolve a major problem as
thousands of rent-related litigations are pending in courts, and it takes years
to get a decision.
It is believed that this will boost Rental Housing.
“This will unlock a huge amount of rental stock into the market as more
property owners will be encouraged to rent houses. Currently, not many property
owners rent out properties and primarily fall back on property appreciation
because the rental yield is very low (about 1-2%) and there is always the fear
of the tenant not moving out after the lease has expired,” said Anshuman Magazine,
chairman and MD of CBRE South Asia Pvt Ltd.
The proposed legislation has been given the “model”
tag to let states have the option of adapting or rejecting it because land is a
state subject.
Currently, almost all states have their own rent
laws. But these have become outdated and fail to serve purpose. Its hurdles
& non-transparency has not only made renting out a property a risky affair
for landlords but taking a house on rent has become a nightmarish experience
too. Many a times tenants are forced to have arbitrary & untimely rent
hikes or face eviction.
Property & Legal experts have welcomed the
draft law. The law has provision that rents will be decided by respective state
governments, which will be at par with market rates. States would also have the
power to put a cap on rent rates to check arbitrary hikes.
The move will bring relief to landlords of old
properties in many cities where tenants have been paying rents which were fixed
decades ago. These rents going by today’s value of money are just peanuts.
These are as good as taking no rent.
Because of safeguards for tenants they don’t live
in the fear of getting evicted.
“All tenancies entered into after the commencement
of the act shall be for a period as agreed between the landlord and the tenant
and as specified in the tenancy agreement,” the draft law states.
It says that no one can let out or take on rent a
property without entering into a written agreement, registered with the rent
authority. Besides, all disputes will be heard at rent courts that states will
have to set up. Civil courts will no longer hear such cases, as is the case
now.
Once fully
implemented, owners of prime properties across the country will start getting
rents as per market rates from tenants and periodic, may be annual, hikes.
For one year,
after its implementation by State Governments, tenants in already rented
properties will continue to pay old rents. Subsequently they have to sign new
agreement specifying new rent as per market or mutually agreed rate and
period of tenancy. These agreements will
have to be registered with rent authority, which will be established by
respective state governments.
The Act is aimed
at providing safety for both Tenants as well landlords and unlocking existing
properties, both residential & commercial, for rent. Another key point is
faster settlement of rent disputes.
It also has provisions for limiting security
deposit equivalent to a maximum of three months’ rent .Landlord will also have
to refund security within one month of termination of agreement. The proposed
law specifies that Landlord can’t arbitrarily stop necessary services to tenant.
In case of dispute, Rent Authority which is to of minimum Deputy Collector
level, will look into case. If tenant’s fault is established he/she will have
to pay two times the rent as
penalty.
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