India’s ready-to-use houses may soon come into active stock if the states and Union Territories enact their own versions of the Model Tenancy Act or suitably modify existing tenancy laws. The Union cabinet passed the new model Act on June 1 2021.
Census 2011 found 1.1 crore usable houses locked up and lying vacant. In a country where the estimated housing shortfall was 1.8 crore at the time, it seemed that those who could afford to buy houses did not live in them and the ones who needed the houses could not access them. The biggest problem was that the ones who could buy them, did not often dare to lease them out because the tenancy laws have been skewed in favour of the tenant.
Take the case of a journalist who had leased out her house to a young professional couple in Gurgaon. The owner was an NRI and the house was just over 10 years old. When the tenants stopped paying the rent and refused to vacate, the landlady could only approach the civil courts for payment of rent and not for eviction. This was because she could not prove that she needed the house for self use. Also, once houses in Haryana crossed 10 years, they came under the Rent Control Act and further action against the tenants became even more complex.
In Kerala, a senior doctor had to fight in court for 10 years before his house could be released from tenants. The tenant was finally evicted by the police after a court order from the apartment in Kochi. “I did not feel good about placing the family’s things out on the road,” says the doctor. “However, I felt that the house would slip away from me and I was not in a position to fight any more court battles.”
There are provisions in the Model Tenancy Act That protect the interests of both the landlord and the tenant. The Rent Agreements have to be registered and are given a unique identity number, Disputes have to be redressed within six months by Rent Authorities and Tribunals at the district levels, non-payment of rent will attract penalties enforced by the Rent Courts and there are protection mechanisms of tenants too. Eviction, which was practically impossible in earlier times has been made possible with a detailed list of variables specified in the law.
These provisions seem to be towards fostering a sense of security in both landlords and tenants.
The question is how long the states will take to implement these in their own domains and how soon the Rent apparatus takes to be set up. The provisions are similar to the Real Estate (Regulation & development) Act (RERA) where a Central model Act was created and states could make their changes during enactment. State authorities were different and efficiency depended on the efficacy of the state mechanisms.
Today Property disputes clog Indian legal systems across the country. Over 60% of cases relate to property. Can this New Act help ease the burden on the civil courts? Can it help release vacant housing stock?
If it does, it may spell the return of the property investor who now has the legal entity of property managers, governed by rules in the Model Tenancy Act, to manage the properties on behalf of the landlords. This may lead to buoyancy in the residential property markets, which accounts for over 70% of the real estate market currently.
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