The Union Cabinet has approved the Model Tenancy Act for circulation to all States / Union Territories for adaptation by way of enacting fresh legislation or amending existing rental laws suitably. The government had first released the draft of the act in 2019.
Its hoped that the Model Act will help to overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth.
The Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country. It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness. Model Tenancy Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market.
The Model Tenancy Act will facilitate unlocking of vacant houses for rental housing purposes. It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage.
The Model Tenancy Act talks about establishing a rent authority to regulate renting of premises and to protect the interests of landlords and tenants. The proposed authority will also provide speedy adjudication mechanism for resolution of disputes and matters connected therewith or incidental thereto, according to the act.
It also puts a cap on the amount of security deposit – usually a bone of contention between landlords and tenants – to a maximum of two months of rent in case of residential premises and six months in case of non-residential premises. Currently, this amount differs from one city to another. For instance, in Delhi, the deposit is usually two-three times the monthly rent, but in Mumbai and Bengaluru, it can be over six times the monthly rent.
Another crucial point where the act has provided a mechanism, is vacating the premises. The Model Tenancy Act says that if a landlord has fulfilled all the conditions stated in the rent agreement – giving notice etc – and tenant fails to vacate the premises on the expiration of the period of tenancy or termination of tenancy, the landlord is entitled to double the monthly rent for two months and four times after that.