‘Model Tenancy Act will rebuild trust between owners and tenants’

‘Fair in terms of deposits, agreements’

Published - July 27, 2019 10:01 pm IST - MUMBAI

CHENNAI, 20/04/2009: To Let board at a house at Mahalakshmi Street, T. Nagar in Chennai.
Photo: R. Shivaji Rao 20-04-2009

CHENNAI, 20/04/2009: To Let board at a house at Mahalakshmi Street, T. Nagar in Chennai. Photo: R. Shivaji Rao 20-04-2009

The Model Tenancy Act, 2019 drafted by the Union Ministry for Housing and Urban Development, is expected to benefit both owners and tenants, thus releasing lot of housing stock for rental purpose.

“There is a huge trust deficit prevalent between homeowners and tenants, creating a huge demand and supply gap when it comes to the home rental market,” said Amarendra Sahu, co-founder & CEO, Nestaway Technologies Pvt. Ltd., a service provider in the space. “The Model Tenancy Act, 2019, offers a balance between the rights and benefits, for both owners and tenants; and identifies the role of property managers,” he added.

He said when the company started in 2015, about 20% of its owner base was reluctant to give their house on rent fearing eviction risks.

For the past four years, he said, Nestaway had been working to reduce the trust deficit.

“We support the Model Tenancy Act 2019 and believe it will help both homeowners and tenants with the right pricing of rental homes, appropriate security deposits, and the nature and tenure of rental agreements, in a positive way,” he added.

Commenting on the Act, Anuj Puri, chairman, Anarock Property Consultants, said, “At first look, the draft policies seem to favour both tenants and landlords. In all fairness, it aims to regulate the rental housing market by a more market-oriented approach by carefully balancing the interests of both land owners and tenants.”

However, he said there could be some challenges in implementation.

“The cap on the security deposit can become a pain-point for many landlords — in cities like Bengaluru, a 10-month security deposit (with some scope for negotiation) was the accepted norm.

“Also, if a tenant defaults or causes significant damage to a property, a two-month security deposit may not cover the expenses the property owner incurs in repairs,” he said.

Mr. Puri said while the government lays down the basic policies, the exact rules will likely change within each State since land is a State subject.

States’ call

“Like we saw in the highly lopsided roll-out of RERA, the Model Tenancy Act, 2019 may lose its real purpose if States do not follow the basic guidelines and dilute them,” he added.

According to Mr. Puri, while the capping of the security deposit amount to a maximum of two months may benefit tenants, the heavy penalty that will now be imposed for non-vacancy of the residential unit would act as a deterrent and protect the interest of owners.

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