Real estate industry welcomes “game changer” Model Tenancy Act

 The Mumbai real estate industry on Wednesday welcomed the Narendra Modi cabinet’s formal approval for the Model Tenancy Act which would enable states and union territories to enacting fresh legislation or amend existing rental laws suitably.

In the offing for a while, the Act will help overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth.  The Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country.  It will enable creation of adequate rental housing stock for all the income groups, thereby addressing the issue of homelessness.

Reacting to the development, Dr. Niranjan Hiranandani, National President, NAREDCO said, “The Model Tenancy Act will facilitate unlocking of vacant houses for rental housing purposes.  It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage. The Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market.”

“Industry bodies like NAREDCO have been requesting authorities for a Model Tenancy Act which would create a vibrant, sustainable and inclusive rental housing market in the country.  This Model Tenancy Act will ensure creation of new rental housing stock for all the income groups, addressing the challenge being faced by home seekers,” he said.

“There was a need for a new law, which would make things easier for all stakeholders – tenants, landlords and investors – to transact and deal in rental housing,” he said.

Real estate industry veteran and former CEO of JLL India, Ramesh Nair said, “Housing for all cannot be successful without a robust rental housing model. The act will help reduce slums and also improve the quality of housing in the country if well implemented. All efforts of previous governments have focused only on the ownership of housing. A robust implementation can also help attract FDI given the current interest levels of global real estate funds towards “beds” (residential rental) and “sheds” (warehousing).”

 

Hailing the Model Tenancy Act as a “game changer”, Anuj Puri, Chairman - ANAROCK Property Consultants, said “The Model Tenancy Act will help bridge the trust deficit between tenants and landlords by clearly delineating their obligations and will eventually help unlock vacant houses across the country. To ensure speedy redressal of disputes, the Act also proposes to establish separate Rent Court and Rent Tribunal in every state/UTs to hear appeals for matters connected to rental housing.”

He said this Act can fuel the rental housing supply pipeline by attracting more investors, and more rental housing stock will help students, working professionals and migrant populations to find urban accommodation (especially in COVID-19-like exigencies). “Once implemented in all fairness across states, it will go a long way in formalising and stabilising the rental market. It would also revive the fortunes of not just the rental market but the housing sector at large. However, even while the Model Tenancy Act is a step in the right direction (providing a clear roadmap for states to follow), it will remain to be seen to what extent the states will toe the central government’s line.”

 

Dr. Samantak Das, Chief Economist and Head Research & REIS, JLL said the Act will provide a guiding framework to all states to make their respective Tenancy Acts contemporary. “Current Acts will give way to the new ones where uniformity will prevail, and it will give confidence to homeowners for renting out of existing vacant properties. Also, if the states implement the Tenancy Act in true letter and spirit of the Model Act, we will inch towards institutionalisation of rental housing market. In case of RERA, the central Act helped states like Maharashtra to make MahaRERA successful to a large extent. On similar lines, we may expect Tenancy Acts in states to become more efficient in providing level playing field to both owners and tenants.”

 

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said “In the recent past, a spate of policy reforms in quick succession have accelerated the development of Indian real estate sector into a more mature and organised sector. Laws relating to RERA, REIT, GST and now Tenancy will aid the property sector’s transformation into a more transparent and consumer focused one; and thereby attracts the world’s best institutional investors and developers for greater participation in the country’s realty sector.”

 

“While tenancy in commercial real estate segment has been a well-established tenet of the market model, the fractured landlord tenant relationship in case of housing segment has discouraged development of market model and obstructed institutionalisation of a rental housing market. The Model Tenancy Act has provisions to regulate the rights and duties of both the landlord and tenant and this shall balance the scale between both these counter parties. We believe this law is a step in the right direction and are glad to see that in just less than two years since the introduction of model law, and amidst the pandemic, this will become a ground reality.”

 

Rohit Poddar, Managing Director, Poddar Housing and Development Ltd said, “The approved Model Tenancy Act (MTA) will help to regulate and promote rental housing in the country and will play a crucial role in increasing the supply of rental homes, which in coming times, will be an essential requirement with rising population. The Act will help in building a better tenancy market. The terms and conditions of the rental tenancy are clear to both landlords and tenants and reduce a significant number of disputes that take place due to unwritten agreements, thus the move will benefit both the landlords and tenants by creating a cohesive and sustainable environment. The approved framework will boost the overall rental housing market in India.”

Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty and Secretary, CREDAI MCHI said, “The Model Tenancy Act will boost supply in the rental housing segment. There are many homes that are vacant as people are afraid to give them on rent. The Act will make renting more lucrative for both, landlords and tenants, by plugging the many gaps that currently exist in policies regulating the rental housing segment. The model tenancy law will eliminate anomalies and give a boost to the real estate sector."

 

Anuranjan Mohnot Managing Director & CEO, Lumos Alternate Investment Advisors said, “The implementation of the Model Tenancy Act is one of much-required reform in real estate especially when the country has a peculiar problem of housing shortages and lakhs of residential units are vacant across India. The legal comfort to landowners about quick redressal to the problem of overstaying tenant, as well as protection of tenant rights on arbitrary rent increase etc can bring much required institutional investment in the `built-to-rent’ residential segment in India.”

 

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory said, “The Model Tenancy Act will protect the interest of both renters and the landlord. While tenants have to submit at least a year's rent as security deposit it will also address the overstay by tenants and make eviction easy for landlords. Even if states set up the regulatory framework, it is up to the developers as to how comfortable they would be to engage in this housing segment as the rental yield that varies anywhere from 2% to 3% may not be lucrative enough for them. Compared to this, the developers pay higher interests on their loans for project development."

 

Pankaj Bhansali, COO, Eqaro Guarantees Pvt Ltd

 said, “It is a landmark reform that will usher in a new era for the real estate sector in the country. The move will help address the high number of vacant residential units in India, which is over 11 million houses, making it economically productive, reducing litigation, and encouraging trust between the landlord and the tenants. The new Model Tenancy Act will also encourage and attract institutional investments into the residential assets. Rental bonds coupled with the new act will provide the much-needed ease of renting the houses for landlords. Rental Bonds and the provisions of the Act will help address the friction points in the tenancy process, thus promoting trust between the landlord and the tenant. The new act would bring in over 11 million urban houses into the rental market and help address the country's massive housing shortage.”

“We expect states to act swiftly and adopt the law, have the necessary regulatory structure in the form of state tribunals to adjudicate on the required matters and provide a common framework across the country. The rental yield in India is amongst the lowest in the world. The Act once adopted and enforced by states promises to create a sustainable and inclusive rental housing market in the country. Like the RERA law, the Model Tenancy Act will reform the rental housing business in India with utmost transparency,” Bhansali said.