Union Cabinet approves the Model Tenancy Act

After releasing the first draft in 2019, on 2nd June 2021, the Union Cabinet approved the Model Tenancy Act also known as the MTA to aid the rent economy in the estate sector and streamline the process of renting a property. This move will help overhaul the legal work in regards to renting a house across India.

The Union Cabinet, led by Narendra Modi, has approved the Model Tenancy Act. This act will be circulated to all the states/ union territories for adaptation, the states can then change it as per their suitability. According to the Indian government, the issue of housing shortage can be reduced with this act. With the help of this act, rental housing will be gradually shift towards the formal market.

Why this Act?

The rental laws in India were restricting the growth of rental properties and discouraging owners from renting out their vacant real estate due to the fear of repossession. As a result, more than 1 crore houses were vacant in urban areas.

By bringing accountability and transparency in the existing system of renting real estate and by balancing the interests of both the tenant and the property owner, one can unlock their vacant house.

The states can either adopt the Model Tenancy Act with fresh legislation or they can factor in the new MTA in their already existing rent acts. This new act aims to unlock rental properties, formalize the shadow market of rental real estate, ease exploitative practices, increase rental yields, increase discipline and transparency.

How it benefit landlords

To discourage overstay of tenants

The policy states that tenants would be liable to pay the landlords double the rent for two months and four times the rent in the consequent months, in case they stay after expiry of the rental agreement.

To make eviction of tenants easy

Under the model policy, landlords could approach the rent court asking for eviction, if the tenants fail to pay the rent for two months in a row.

To stop sub-letting by tenants

Without prior permission of the landlord, the tenant is not eligible to sub-let whole or part of the rented accommodation.

How it benefit landlords:

To stop intrusion of the landlord

That landlords march into one’s premises as and when they want, is a common complaint among those living in rented homes. To stop this from happening, the policy states that landlords need to give a written notice, 24 hours in advance, to visit the premises. Also, they cannot make a visit before 7 am and after 8 pm.

To cap security deposit demanded by landlords

In cities like Mumbai and Bengaluru, tenants have to pay at least a year’s rent, as security deposit. Landlords in states that adopt the policy would not be able to ask more than two months of rent, as a security deposit.

To regulate increase in rentals by landlords

During the entire rent agreement period, landlords cannot hike the rent, unless something giving them the right to do has been clearly mentioned in the rental agreement. The landlord will have to give three months’ notice to the tenant, before increasing the rent.

Landlord responsible for structural maintenance of rented premises

While the policy states that both parties will be responsible to maintain the physical health of the rented property, the responsibility of structural maintenance will lie on the landlord.

The Model Tenancy Act will help facilitate the unlocking of vacant houses. It also aims at creating a sustainable, inclusive, and vibrant rental housing market in the country. By addressing the issue of homelessness, it will enable creation of enough rental housing stock for people of all income groups.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.

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