Cabinet Approves Model Tenancy Act For Circulation To States: How It May Impact You

What Is The Model Tenancy Act

• According to the MTA, the tenant must pay a security deposit equal to two months' rent, and a landowner cannot access the rented premises without 24-hour notice to make repairs or replacements.
• The Union Cabinet, chaired by Prime Minister Narendra Modi, authorised the Model Tenancy Act (MTA) for distribution to all States and Union Territories for adoption by way of new legislation or appropriate amendments to existing rental regulations on Wednesday (June 2).
• The Model Tenancy Act, according to the Ministry of Housing and Urban Affairs, will "allow institutionalisation of rental housing by gradually pushing it towards the legal market."

Details

• It is projected to boost private investment in rental housing as a business model for tackling the massive housing shortfall, according to the report.
• Grant Thornton Bharat Partner and REI Leader Alok Saraf said: "Due to a lack of institutional participation and enforceable legislation to safeguard the interests of owners and lessees, rental yields in India have historically been much lower than in other industrialised economies. Once structural reforms like the Model Tenancy Act are in place, I am convinced we will see a considerable increase in institutional activity in the rental housing area."

Encourage The Growth Of Rental Housing By Enacting Legislation

• According to a government release, the Act would make it easier to release abandoned houses for rental housing and will also help to revamp the legal structure around rental housing across the country.
• "After Affordable Rental Complexes, the Model Tenancy Act is an incremental step towards promoting Housing for All," stated Atul Monga, co-founder and CEO of BASIC Home Loan. A formal policy will enhance the number of rental flats, averting a scarcity like the one that occurred last year amid the migrant worker exodus.
• The planned Rental Authority and standardisation of agreements will safeguard renters and landlords alike against unjustified rent increases, as tenants will be required to adhere to pre-agreed terms. It will also allow for quick resolution of future issues, minimising the need for long legal proceedings."

The Amount Of The Security Deposit Must Not Exceed A Certain Amount

• It's worth noting that MTA handles issues including the necessity for a formal rent agreement, security deposit, annual rent increase rate, and eviction reasons.
• It also limits the amount of security deposit - which is often a point of disagreement between landlords and tenants - to two months' rent for residential properties and six months for non-residential properties. At the moment, the sum varies from city to city. In Delhi, for example, the deposit is normally two to three times the monthly rent, whereas, in Mumbai and Bengaluru, it might be more than six times the monthly rent.
• A landowner cannot access the rented premises without 24-hour notice to make repairs or replacements, according to the statute.
• In 2019, the Centre suggested a "model tenancy law" under which the landowner would have to give three months' notice in writing before raising the rent.

What do you think about the case?