By Shajai Jacob

The Union Cabinet’s approval for the Model Tenancy Act is being hailed as a landmark moment in Indian real estate. In one of the most significant developments for residential real estate investors, no one will henceforth be allowed to enter into a rental situation without a written agreement – and that’s not all.

Aimed at increasing confidence of landlords to rent out their vacant properties, this Act will serve as booster for NRI investments. For an NRI investor, it is a great assurance that the tenant of their property is bound by legal terms. Further, the act defines the timeline within which any rental disputes will be resolved.

The new law also calls for a digital platform where tenancy agreements need to be submitted to the rent authority in future. Digital infrastructure is more convenient and brings an added level of transparency for NRI landlords. With this Act, there is now a clear demarcation of responsibilities between a tenant and landlord.

NRIs have always shown a keen interest in investing in Indian real estate. However, the uncertainties around ensuring that tenants uphold the terms and condition of the rental agreements were, so far, significantly high for NRIs. The entire process of finding a tenant and collecting the dues is usually carried out by family or close associates in India.

With the rental market now becoming more organized, institutional service providers will come into the picture to address the market demands. The increased trust and confidence thus generated will enable NRIs to easily monetize their existing vacant residential properties by letting them out in a coherent, cohesive, and easily manageable way.

The last two quarters have seen significant traction of ready-to-move inventories in India’s prime residential markets. The new regulatory framework will provide additional impetus to this demand. With the implementation of the Model Tenancy Act, prices of RTMI properties are expected to increase soon.

As per ANAROCK Research, over 4.22 lakh homes are scheduled for delivery by 2021-end. It is interesting to note that only 28% of these homes are unsold as on date. Going by the burgeoning demand for ready homes, developers will continue to be mindful of adhering to delivery schedules despite the impact of the pandemic’s second wave – which is already showing signs of abating.

Most of these near completion units are in the mid-range and affordable segments. 40% of the stock is priced less than INR 40 lakhs and 35% is priced between INR 40 to INR 80 lakhs.

With very low interest rates and the currency exchange rate still very much on the side of NRIs, this is indeed a promising time for those with an eye of income-generating residential assets. Property rates remain range-bound and developer offers and discounts are still available for serious buyers.

With the regulatory framework for rental homes now also being strengthened and rendered increasingly transparent, it is the perfect time for NRIs to invest in Indian real estate for sustained rental income.

About The Author: Shajai Jacob, is MD & Country Head – ApnaComplex & CEO – GCC, ANAROCK.

Also Read: Model Tenancy Act The RERA Of Rental Market

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By Prakkash Rohira, Advocate, Bombay High Court

The Model Tenancy Act is an extremely updated and well-compiled law having its own expedited process for dispute resolution and irons out most of the issues between landlords and tenants, with its expedited dispute resolution process.

The Tenancy Act aims at resolving all rent-related issues concerning both residential and commercial properties, but excluding industrial premises.

Tenants and Landlords not in dispute need not worry as The Act Shall be binding upon tenancy Agreements entered into after the commencement of the Act, and all cases/disputes pending on the commencement of the Act shall be continued and disposed of in accordance with provisions of existing State Rent Control Act. 

The primary focus of the Tenancy Act appears to not side either the landlord or the tenant but is actually designed to punish the violator of the generic provisions of the Contract.

It appears to be very specific and punitive to the violators of the term of the tenancies created as per the Act.

Some of the features are as follows:

1. The Act Establishes A Rent Authority, who within 3 months of appointment shall develop an online platform, wherein Rent Agreement shall be submitted and registered authority agreement shall be in writing, also inform the authority as per specified form, within 2 months from the date of the agreement, and Unique Identity Number shall be given to the Parties. All such information is to remain recorded with the Authority.

2. The Agreement must be in writing and shall be treated asconclusive proof. Both Parties are to hold one original copy each of the Agreement.

3. The Act Recognizes Real Estate Agents as “Rental Agent”. The Act has also widened the definition of landlord and tenant from earlier interpreted terms, largely to include legal heirs, and has categorically recognized “Property Managers” as well.

4. The Tenancy shall be for a fixed period of time. The Tenancy can be terminated earlier subject to certain conditions or defaults in payment of rent.

5. The Act recognizes conditions of Force Majeure, and the Act does not in any manner indicate the Covid-19 Pandemic to be a Force Majeure. 

6. There is a maximum limit of 2 months of deposit on Security Deposit for residential premises and of 6 months Security Deposit for commercial premises.

7. The Act lays the burden of improvement and Structural Repairs of the building on the Landlord whilst putting the burden of maintenance and replacement of fixtures, electric switches, sockets, kitchen, glass panel, windows, doors, etc. on tenant unless agreed to otherwise in the tenancy agreement.

8. The Act speaks about the Rights of Legal heirs of all Tenants and Landlords on their respective rights and removes several disputes between them. It eases out the recovery of possession in premises of death or acknowledges and identifies the case of property even in the death of parties.

9. Landlord or manager cannot withhold essential supply or services as defined in the Act.

10. On the expiration of the period of tenancy or termination of tenancy by an order or notice, such tenant shall be liable to pay the landlord Twice the monthly rent for the first two months; and Four times the monthly rent thereafter the tenant continues to occupy the said premises.

11. The Explicit Roles, Duties and Obligations of the Tenants and Landlords are Described in the Act in brief.

12. Dispute Resolution:

• a. Any Applications filed shall be filed before the Rent Authority, upon not being satisfied with the order of which, an Appeal to the Rent court can be made. An establishment of Rent Tribunal in each District is also defined in the Act.
• b. Disputes when arisen, shall be disposed of expeditiously in a time-bound manner and restricted to 60 days whilst the appeals arising from the same shall be disposed of within 60 days.
• c. Very limited provisions of Civil Procedure Code stand Available, the act rather explicitly states to rely upon the Principals of Natural Justice thereby removing and easing off a lot of technicalities. 
• d. For recovery of fine, the Rent Court shall be deemed to be a Magistrate and have been powers of JMFC to recover “fine” under Criminal Procedure Code.

13. Procedure – Landlord / Tenant can:

• a. File application.
• b. Upon receiving the aforesaid, Rent Court/ Tribunal shall issue notice.
• c. Opposite party will file a reply, rejoinder, etc. 
• d. Date of hearing to hold a summary inquiry as deemed necessary or fit.
• e. Authority to dispose of the matter within 60 days, Appeal to be Decided within 60 days.

14. The Rent Court or tribunal also has powers to execute for delivering possession or attach one or more bank accounts for recovering of amounts due.

Towards several aspects, states have been given power to make their own rules and remove difficulties.

As Maharashtra would head to establish such authorities, the digital move will be seen with great appreciation, and we may find ourselves at a model closer to what we could see in MahaRERA. MahaRERA helps in providing extensive information to the public at large for real estate projects and has been taken as a positive step. Experts anticipate this move to be positive as well, however, the technicalities must be ironed out while establishing these Authorities and Courts. 

It however must be considered and a sufficient number of Courts must be established as the Act puts a burden on the Authorities to pass orders in a timely manner. The Citizens also have been anticipating and waiting for such established authorities and Courts for Cheque Bounce cases. The establishment of such courts and Fast-Track reliefs and Justice will strengthen the spirit of the citizens, assure them Speedy Justice and simultaneously declutter the courts to handle the existing burden of cases.

Also Read: Model Tenancy Act The RERA Of Rental Market 

PS: The views expressed are the opinion of the expert

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