Model Residential Tenancy Act 2011 to ensure rents at market rates
An overhaul of the legislative set-up could soon result in thousands of tenants now paying monthly rent of Rs 50 or 100 shelling out rentals that reflect market reality.
The Model Residential Tenancy Act, 2011 prepared by the housing ministry is intended to replace archaic rent control legislations that capped rentals, resulting in landlords getting a pittance for properties in prime localities in metros.
The draft legislation - which is yet to be adopted by the states - has proposed that once the law is in place, in case of tenancies entered after notification, the rental will be based on an agreement between the landlord and the tenant.
For existing ones, including those properties where rent was finalized several years ago, there will be a freeze on revision for 24 months. In the 22nd month, the landlord will be able to seek a revision.
In the absence of an agreement , the landlord will have the option to terminate the tenancy.
Govt estimates housing shortage of 25 million
The proposed change in laws on rent control may come as a shock to tenats paying monthly rent of Rs 50 or 100. Though rent control is a state subject, the Centre is seeking adoption of the model law by mandating that only states that enact this law would be eligible for funding under the flagship Rajiv Awas Yojana that has a budgetary allocation of over Rs 800 crore in 2011-12 and comes with other benefits such as interest relief.
The Centre is of the opinion that the current legal system has discouraged landlords from reinvesting in their properties as rentals have been kept artificially low. The ministry has estimated a housing shortage of around 25 million in the country and by allowing for increase in rentals, the government in encouraging property owners to let out their properties and ease the deficient supply of dwellings.
The ministry is drawing inspiration from the Jawaharlal Nehru Urban Renewal Mission that got several states to repeal the Urban Land Ceiling and Regulation Act (ULCRA). Under the scheme, central assistance was contingent upon states repealing the law.
There are also clauses that have been built in to protect the interests of tenants. To check against arbitrary hike in rents , the revision would be based on terms set out in the agreement signed by both the parties. In addition, a three-month written notice has to be given before the increase.
