Citizens' Issues
Model Tenancy Act & Reality
Will the proposed model tenancy act have teeth and make it easier to rent properties?
 
The Indian realty market continues to suffer from the strange dichotomy of a huge pent-up demand for homes and staggeringly high inventories of unsold dwellings due to unaffordable prices. At the same time, those who have purchased apartments, as an investment, hesitate to rent them out. This is because the rental housing market has been destroyed over the decades by laws and municipal rules that are biased in favour of tenants. 
 
Even in cities like Mumbai, where short-term leave-and-licence agreements afford a degree of protection, most property-owners are unwilling to risk having tenants. Consequently, thousands of apartments lie vacant in a city that is starved of residential premises. Many of these are owned by realty ‘investors’ or developers who cannot find buyers. The numbers are staggeringly high in all metros, especially Mumbai, NCR (National Capital Region) and Bengaluru.
 
In theory, the government accepts the need for sensible rental agreements, but little has happened in that direction. Now that high property prices have slowed down new sales, it is time the government acted quickly to make vacant dwellings accessible to people, by reforming tenancy laws. 
 
The National Democratic Alliance (NDA) has reportedly decided to revive the Draft Model Tenancy Act, 2015, which will replace the Rent Control Act of 1948, in an attempt to revive the rental market. Ironically, this is yet another move that the United Progressive Alliance (UPA) began, and abandoned, four years ago. The question is: Will it be good enough to encourage property-owners to safely rent out apartments? 
 
Ashwinder Raj Singh of Jones Lang Lasalle, a property consultant, writes that the draft tenancy Act is well-balanced. It will allow landlords to charge market rates and also revise rents periodically or have the property vacated without long and expensive legal battles. At the same time, he says, “There will be a rent ceiling which will be fixed in consultation with the state government to avoid arbitrary hikes.” Also, the security deposit paid by tenants will be capped at three times the monthly rent and the conditions under which landlords will be able to evict tenants will form a part of the written agreement. Further, Mr Singh says, “Tenants can claim a reduction in rent if the quality of services available deteriorates in any way.” It is not clear how this ‘model’ rent agreement will allow landlords to avoid any of the issues that exist today. Any law that allows the government to ‘fix’ a ceiling, instead of allowing market forces to decide rentals, will only perpetuate the current distorted market. 
 
Instead, if the government makes it safe for landlords to rent apartments, to be able to collect the rent on time or evict recalcitrant tenants, thousands of apartments in all Indian cities will immediately come to the market for use. The free and easy availability of rented property will automatically keep rentals as well as deposits in check without government intervention or interference. 
 
It remains to be seen what rules will be framed to prevent arbitrary eviction of tenants; but any ‘model agreement’ that requires the landlord to obtain a court order to evict a tenant is a non-starter because of the excruciatingly slow and expensive judicial process. The NDA’s solution apparently is to have special courts to handle disputes. If these are, indeed, set up (and not just announced on paper, as is usually the case), the rental market may look up. But the government has a poor track record in setting up ‘special’ courts. In fact, if the consumer court system had delivered results in three months, as was promised by the Consumer Protection Act, there would be no need for such special courts. 
 
Moreover, all the good intentions of legislation are defeated as far as grievance redress is concerned. As Ashwinder Raj Singh points out, land is a state subject and any model agreement cannot be binding on them unless specifically adopted. A clue to how this Act will be received lies in the fact that 12 chief ministers did not bother to attend a meeting called by NITI Aayog, presided by the prime minister, in July. But even if the BJP-ruled states were to adopt this model tenancy Act, it would require a lot more than good intent to actually make it work. 

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COMMENTS

Naresh

2 years ago

The Maharashtra Rent Control act is draconian and as a landlord we are on the wrong side of it. The tenant is also miserable because of his own attitudes as well as his greed to extract every penny out of his meagre rent. I think the Maharashtra Housing Policy due in 2016 will exclude commercial properties exceeding 1200 sq feet out of the preview of the Act.

manoharlalsharma

2 years ago

First to implement proper 'grievance redressal'system then only can one can BUILD TRUST to day we make complaint at CM it takes 120 days to SCAN and SMS.

Shirish Sadanand Shanbhag

2 years ago

Till the time the new model rent act comes in to force, Leave Licence Act, is good enough to protect the interest of the landlord as well as the licensee (rentee).

R S Murthy

2 years ago

It is our habit to find fault with law. system or procedure. We never blame the people. Not that all tenants are problematic or trouble shooters. When I went to Kolkata on my posting, it was not at all difficult to get a flat on rent as the landlords were prefering other state people that too working in a bank rather than the people of the state. Our own people where they get advantage exploit law to the maximum extent and people at the helm also provide full support. Number of litigations on increase as we enjoy in postponing a decision. In any case one pesrson the complainant wants speedy justice but all others do not want quick disposal as all of them are ejoying at the cost of complainant. Dispose all litigations in 3 months irrespective of its seriousness, there is no need to pass any fresh legislation.

Vaibhav Dhoka

2 years ago

Rent act in India is outdated.Are Landlords" Children of Lessor Gods".What sin has landlord committed that all laws are in favor of tenants.There is no dearth of tenements but people are afraid to rent as laws and judicial process if involved is death nail for landlord.Everyone in India expects revision in pay taxes and other levies,then what is wrong in landlord asking for revision every three years.Rent law is like free meal for tenants.Therefore people keep their flats vacant rather than rent out.Rent litigation takes decades for decision to come.

Urban Inflation

Combined inflation for urban and rural areas increased marginally, to 5.40% in June 2015, from 5.01% in May. Inflation in urban areas increased to 4.55% in June from 4.41% in May. Food inflation in urban areas increased to 5.41% in June from 5.08% in May. In urban areas, inflation of vegetables remained steady at 6.77% year-on-year. Inflation related to fuel & power also remained steady at 3.60% in June. Inflation for housing, too, was steady at 4.48%. Inflation for clothing remained unchanged at 4.88%; for miscellaneous items, it increased to 3.39% in June from 3.13% in May.

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Nifty, Sensex, Bank Nifty weak – Tuesday closing report
If Nifty goes below 8,480, it will head towards 8400
 
We had mentioned in Monday’s closing report that NSE’s CNX Nifty may turn weak if it closes below 8,540. Up to 2.20pm Tuesday, the 50-stock index moved close to Monday’s closing. However, after this, it lost its strength, slid lower to hit a four-day (including today) low, and closed near to this level.
 
 
India VIX rose 0.92% to close at 15.0975. NSE recorded a volume of 88.07 crore shares.
 
Lower-than-expected first-quarter results and the logjam on the first day of Parliament's monsoon session dampened the sentiments in the Indian equity markets. The wider 50-scrip Nifty closed down 74 points or 0.86% at 8,529.45 points.
 
The 30-stock Sensex, which opened at 28,381.82 points, closed at 28,182.14 points, down 237.98 points or 0.84% from the previous day's close at 28,420.12 points.
 
Major results like Infosys, HDFC Bank, Sun Pharma and Hindustan Unilever released on Tuesday had the biggest impact on stock- or sector-specific indices.
 
Investors were also anxious about the ability of the government to pass key bills like Goods and Services Tax (GST) and land bill during the monsoon session.
 
Major Sensex gainers during Tuesday's trade were: Infosys, up 11.05% at Rs.1,112.65; Bharti Airtel, up 3.68% at Rs.445.25; Wipro, up 1.69% at Rs.577; Hero MotoCorp, up 1.10% at Rs.2,690; and Bajaj Auto, up 0.99% at Rs.2,544.60.
 
The major Sensex losers were: Sun Pharma, down 14.95% at Rs.805.30; Vedanta, down 4.74% at Rs.136.60, Lupin, down 4.68% at Rs.1,886.05, ONGC, down 3.56% at Rs.281.35; and Tata Steel, down 3.29% at Rs.274.65.
 
The top gainers and losers of major indices are given in the table below:
 
 
The S&P BSE healthcare index plunged by 1,061.48 points, bank index lost by 361.90 points, capital goods index receded by 224.85 points, oil and gas index was lower by 176.25 points and the FMCG index fell by 133.04 points.
 
Bucking the trend, however, were the information technology (IT) and technology, entertainment and media (TECK) sectors, which made healthy gains. The S&P BSE IT index rocketed up by 489.20 points and TECK index soared by 232.72 points.
 
Among the Asian markets, Japan's Nikkei was up by 0.93%, China's Shanghai Composite Index rose by 0.66%, and Hong Kong's Hang Seng gained by 0.52%.
 
The closing values of Asian indices were:
 
 
All the European indices were marginally in the red.
 

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