From UPSC perspective, the following things are important :
Prelims level : Nothing much
Mains level : Model Tenancy Act - analysis
A draft of the Model Tenancy Act, 2019 was released by the Ministry of Housing and Urban Affairs. Finance Minister stated in the Budget 2019 speech that the rental laws in India are archaic and do not address “the relationship between the Lessor and the Lessee realistically and fairly”.
Features of the act
- It aims to promote rental housing and balance the interests of landowners and tenants.
- It covers residential and non-residential properties.
- It is largely aimed at the urban residential sector.
- Constitution of Rent Courts and Tribunals – Thousands of rent cases clog the lower judiciary and the process is lengthy and time-consuming.
- Time-bound procedures – The Act provides for a time-bound process with dedicated courts for tenants and landlords.
Limitations of the act
- Limited scope – The Model Tenancy Act has a limited understanding of the tenant-owner relationship. It fails to take into account that a majority of tenancies in India are informal. These agreements are based on trust, word of mouth, and social kinship networks.
- Challenge in implementation –
- Either a majority of the rental agreements will continue to be unregistered
- The Act might formalise existing arrangements -> an increase in rents. It will be the opposite of what it sought to achieve.
- The jurisdiction of these courts to hear cases is limited to the tenancy agreement submitted to the Rent Authority.
- All future tenancies that have been submitted to the Rent Authority shall be eligible to approach these courts.
- Older tenancies and informal tenancies will still not fall under its jurisdiction. These problems will continue.
- The Act needs to respond in a realistic manner to actual housing market practices in our cities.
- Focus on the upper end of the housing market
- The vacancy is higher in the upper segments of the housing market. Across urban India, vacancy rates in urban areas is 10.1% while in slums it is 7.3%.
- Implementation of the Act in the upper segments of the housing market will allow some of these vacant houses to enter the rental market.
- This will relieve the pressure and demand on the lower segments.
- Commercial – Residential –
- Commercial tenancies attract a lot more institutional investment.
- Residential tenancies are largely held between individuals and households.
- The two markets are very different from each other.
- The outcomes required of the two sectors are entirely different — while commercial real estate underpins economic development, residential arrangements in urban areas offer the security of tenure and access to livelihoods, health, and education.
- More investments
- Increase the supply of formal affordable rental housing.
- This requires investment on the part of the Central and State governments.
- Publicly provided rental housing will need structured efforts in management, planning, and design to achieve its inclusive agenda.
- Central and State governments to develop schemes for the supply of formal affordable rental housing.
- This could be in the form of housing built to rent for migrants, low-wage informal and formal workers, and students; rent-to-own housing for unsteady low-wage households; and even rental housing allowances/vouchers for the most marginalised in the housing market.
- Wider ambit – The Act needs a wider ambit along with renewed efforts and investments.