The Housing Boost

Source: Indian Express

Synopsis: The Model Tenancy Act can benefit homeowners and tenants.

Introduction:

India is set to double its urban population between 2018 and 2030. By 2028, New Delhi would become the most populous city on the planet. Thus, large-scale migration to urban centers in India is bound to create pressure on housing markets.

As per the Report of the Technical Group (TG-12) on Estimation of Urban Housing Shortage (2012), the economically weaker sections and low-income groups currently face 96 percent of the total housing shortage in India.

Policy bottlenecks:

First, homeowners prefer to keep their homes vacant instead of renting them out due to the existence of pro-tenant rent control laws. As per the National Sample Survey Organization’s data of 2012, 71 percent of households living in rented accommodations did not have a written contract.

Second, judicial delays in case of disputes. In India, an average commercial civil suit was disposed of in 1,445 days in a district court, as per World Bank’s Doing Business Report in 2018.

How the Model Tenancy Act, 2021 can significantly boost India’s rental markets?
  • First, the Act calls for the repeal of existing rent control laws in all states and Union territories. It also seeks to remove monetary ceilings on the rent amount.
  • Second, the Act addresses various challenges such as the fear of illegal occupation/eviction, arbitrary security deposit and structural maintenance-related demands, and high transaction and legal costs.
  • Third, the Act facilitates special fast-track courts to settle rental disputes. It envisions improved contract enforcement through a three-tier dispute redressal mechanism. The adjudicatory bodies at the second and third-tier of appeal are required to dispose of cases within a 60-day timeline.
  • Fourth, the private sector can enter into affordable rental housing markets through models like “Build to Rent” and “Rent to Own”. Under the “Build to Rent” model, private residential properties can serve as a reliable option for prospective tenants. Under the “Rent to Own” model, the owner agrees to sell the house to the tenant in the future and the initial contract contains the necessary clauses to affect the future transfer of ownership. This model is popular in the United Kingdom, Middle East, and Africa.
  • Lastly, the Model Tenancy Act, 2021 provides a promising framework for tenancy agreements. The meagre rents under the rent control laws are the reason behind many housing units and chawls. This points to the need for a separate mechanism beyond the Model Tenancy Act that ensures the provision of safe and good quality rental units for tenants.

The states should use this opportunity to unlock the economic value of vacant housing and increase access to good-quality housing.

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