The union cabinet today approved the Model Tenancy Act with the aim of balancing the interests of landlords and tenants. The law, which is now open for adoption by states and union territories, will encourage landlords who were hesitant to rent their properties under old tenancy and rent control laws, the government said.

Under the new law, renting out any property in urban or rural areas without a written agreement is illegal. This will help formalize the parallel rental housing market, unlock vacant properties, increase rental yields and reduce procedural barriers to registration.

Although it limits the eviction of tenants during the tenancy period, the law requires tenants to continue paying rent even during the duration of a dispute with a landlord. In the event of force majeure, the lessor authorizes the lessee to remain in possession for up to a period of one month from the date of termination under the terms of the existing rental agreement.

According to estimates from the Ministry of Housing and Urban Affairs, around 11 million homes are currently vacant in urban areas, as landlords are unwilling to rent these properties due to the lack of safeguards in current rental laws and rent control. The new law will provide sufficient protection for homeowners, which will encourage them to rent these properties now.

Welcoming the move, Anuj Puri, chairman of Anarock Consultants, said it would help bridge the trust gap between tenants and landlords “by clearly delineating their obligations and potentially helping unblock vacant homes across the country. “. According to him, it has the potential to fuel the rental housing supply pipeline by attracting more investors. “More rental housing stock will help students, working professionals and migrant populations find urban housing, especially in COVID-19 type conditions.

In addition to providing a better balance between the interests of all parties, the law creates a provision for the establishment of separate rental courts and tribunals in each state and UT to hear appeals regarding rental housing issues. The jurisdiction of civil courts in rental matters has been prohibited and a 60-day period for settling disputes in rental courts has been imposed under the new law.

“There was a need for a new law, which would make it easier for all stakeholders – tenants, landlords and investors – to negotiate and negotiate rental housing. This will help reshape the legal framework for rental housing across the country, which would help boost its overall growth, ”said Niranjan Hiranandani,

However, the proper adoption of the new provisions of the law by states and UTs will be crucial for the benefits of the law to reach stakeholders, industry experts said.

“If states apply the law in letter and in spirit, we will move towards institutionalizing the rental housing market. In the case of RERA, central law has helped states like Maharashtra to ensure MahaRERA’s success to a large extent. On a related note, we can expect rental acts in states to become more effective in providing a level playing field for landlords and tenants, ”said Samantak Das, Chief Economist and Head of research at JLL.

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