The ministry of housing and urban affairs (MoHUA) on Thursday said Narendra Modi government is confident of finalising the Model Tenancy Act 2019 by September this year.
In an interview to CNBC-TV18, Durga Shankar Mishra, MoHUA secretary, said that states have been asked to review tenancy laws by July 26 and asked to submit their changes.Mishra said he is confident that more transparent and equitable laws will encourage more rentees to rent their homes and act will not go the
Real Estate Regulation and Development Act (RERA) way.
Q: The big purpose seems to be to give the confidence to landlords that look law is on your side and they should get out and now rent out their homes. Can you run us through some of the key facts of the act which will give that confidence?
A: First let me give you the general scenario. Rightly mentioned in our 2011 census, 1.1 crore or 11 million houses were marked to be vacant. That shows there is a huge availability of the housing across the country but yet people are not ready to put it on rental. Why they are not able to do it? The reason came very clearly in the finance minister’s speech. Also, there is a study by Forbes in 2016 and that said that India has got nearly $20 billion rental housing market that amounts to nearly Rs 1.5 lakh crore.
In 2008-2009, our National Sample Survey (NSS) said that 84 percent of the rental were without written agreements. That means they were all informal. So this means such a huge market and it is all in the informal sector. This is like there is no accountability. Suppose somebody puts his house on rent and then something goes wrong, there is nobody who will ensure that the dispute between the landlords and the tenant is resolved properly. In fact, people are in the courts for a long period, there are long-drawn court cases.
Rent law is basically state subject, so all the states have got rent laws of 60's, 70’s and 80’s. Mostly, these laws focus is on ensuring the protection of the rights of the tenants and not of the landlords. In fact, most of the time landlords want to give the house on rent, then you have to forget about that, because of long term dispute. So, we prepared this Model Tenancy Law, which once we get the approval from the union cabinet, then we are going to circulate to the states. All these states have signed a memorandum of understanding (MoU) with the government of India under the Pradhan Mantri Awas Yojana. They have given a commitment to the government of India that they will either get this new Tenancy Law enacted or they will amend their law to align it with the Model Tenancy Act.
I am very sure, very hopeful that once we circulate it to the states, they are going to adopt it legislate a new law or they will amend their local laws.
Q: One very important point that you have you just said, enforcement of contract has been a big problem. So if a homeowner and a tenant got into a problem, endless rounds of the court were the worry. In the draft act, you have talked about having a separate regulator and a tribunal to resolve these rentals disputes. My question is, will states be able to depute manpower as in the case of Real Estate Regulatory Authority (RERA), we have seen the implementation and the rollout has been very slow. Are you confident that states will bring in a rent regulator and a tribunal for settling such disputes?
A: Definitely, as we have not said that they have to have an independent. There are three bodies which are constituted through this law. One is the Rent Authority, which will be headed by an officer of the rank of the deputy collector in districts. The second is the Rent Court, which will be headed by an officer with the rank of the additional district judge and there is a junior-level judge. The third is the Rent Tribunal, which will be headed by somebody who has served as a judge in the high court and the others are of the senior judicial service. So, we have not said that it has to be independent. But an existing court can be designated as the rent court and a deputy collector in the district could be designated as a rent authority and rent tribunal, an existing tribunal can be designated as a rent tribunal.
Now the question is what to do? The law is very clear, the proceedings are going to be of a summary in nature. So, it has to be completed within 60 days. It has not to follow the CPC verbatim. They will set the rules of business, in fact, the states are going to frame rules. But, the first thing is states are going to make the law, then they will frame the rules and for that, we have prepared our Model Tenancy Act and we will also make model rules also. We will circulate it to all the states so that it will help them.
We have said that this law will be applicable henceforth, that is any tenancy, any new rental will be under this law and for that, it has been made mandatory that tenant and homeowner relationship has to be through a written agreement. This written agreement has to be submitted. There is a timeframe provided to the rent authority, this rent authority is going to register and he is going to develop a software system. Again, we will make a model like in the case of RERA, we will make a model and circulate to all the states so that they can improve upon it. They can have it in their local language.
Q: The draft act has been open for feedback and suggestions. Have suggestions started coming in?
A: I just checked nearly 40 suggestions that have come. We are compiling all those and we have also shared this new law with states and union territories. We have given them time up to July 26 to the public and stakeholders up to August 1. So, once we get all this, we are going to compile all those things. Any good suggestions we will incorporate in the law to ultimately serve the purpose so that there is an accountable and transparent relationship between the tenant and the homeowner. Also, whatever you commit, like in the earlier the state laws, many loopholes were there for the standard rate. Various things were there earlier, have been removed in the current law.
Q: How quickly do you think you will be able to implement it after August 1?
A: Definitely in September, we will circulate the final version of Model Tenancy Law to state and union territories, requesting them to legislate them as early as possible. We will pursue with them, we will handhold them and we will also send the rules by September end.
Q: We say that the purpose of this particular act will be to bring that 1 crore plus empty homes into the market. A lot of these empty homes are not privately owned. They are actually in far-flung areas built by state authorities which are not liveable. Has the ministry done any survey to see what is private ownership, how many of these homes will really come into the market once the laws are more transparent?
A: Once this relationship is very clearly laid down, I am very confident that the existing landlord and the tenant relation which is going on in the informal market, they will all move to the formal market. number one, people will like to have more safe treatment in this relationship. Number two, all those houses which were lying vacant, they will find occupants now as this law is not only for the urban area, this law is for all over the country. So, those who are the owners of these houses, they would like it. Currently, it is like a dead investment. You have invested and you are not getting anything out of it, you do not want to live in that house, so you are just not maintaining it. In fact, the cost of that maintenance is an additional burden, so you just leave it and it is getting deteriorated. Now, people will maintain that and put it on rental.
When you say rental, if you see our 2011 census, in the urban area there are different kinds of things, one is the rural to urban migration, other is the urban to urban migration like from a smaller city somebody comes to Delhi. Then within urban-like say from North Delhi to South Delhi, South Delhi to Central Delhi. Under the Pradhan Mantri Awas Yojana (PMAY), where we have done tremendously well, out of 1 crore demand, which has been assessed through the states and union territories, we have already sanctioned 84 lakhs, more than 50 lakh are already under construction. The way I am getting the figures, in the next month or so, we will deliver 30 lakh affordable homes. So, that is a house which you would like to have for you, it is like security but you keep moving as a student, for business, for employment or for any different kind of work, so this number in our 2011 census was 16.7 crore net of migration. So, if you open this market, maybe there will be a lot of hostels which may come up, there will be co-living, co-sharing etc.
Q: There is an informal paying guest market, there is an informal co-living market and you are saying now it can get organised. There will be organised players like there are rent management companies in America and Europe?
A: In fact, I also feel there will be a lot of new investments. So far people were not investing for rental housing. This will open up a new market in the real estate sector. In fact, when I had a discussion with National Real Estate Development Council (NAREDCO) and Confederation of Real Estate Developers Association of India (CREDAI), they were extremely happy with this kind of development, and see it as a new business. So, a lot of houses which are lying vacant, some of the builders may convert it into rental housing with a lot of confidence that there is not going to be any difficulty in getting those vacated.Provisions like deposit cannot be more than two months and will also make it more affordable for young people to rent homes. There are a lot of rights for both landlords as well as the tenants. The landlord cannot cut the services. If he cuts the service, there's a penalty. On the other hand, tenants have to vacate in time or pay hefty penalty rent. There are several clauses which make it equitable for both parties. Most importantly, rent agreements will be in vernacular languages and not just in English, making it easier for people of different states to understand these.