This article will highlight the background and context under which The Model Tenancy Act, 2021, came into force while also explaining the important provisions of the act in brief, and finally assessing the act in light of socio-economic reality and key issues that emerge out of it. The article also suggests important changes that might refine the act and make it more inclusive. The purpose here is to look at the act more critically and analytically.
The Model Tenancy Act, 2021, was brought in place by the central government after the cabinet approval on 2nd June 2021 to resolve the issues of rental housing in India, but this can also catalyze the real estate market and, at the same time, provide more accessible housing market for both landlords and tenants. The real estate market in India is almost US $ 120 billion, contributing to 7% of GDP and providing employment to over five crore people. The act can also help in providing a fillip to the government’s mission of providing “Housing for All”, at the same time making it affordable.
The main purpose(s) of the act remains to resolve the disputes between landlords and tenants by clearly delineating the rights and obligations of landlords and tenants, reducing litigation, and providing speedy resolution in case of any dispute. These measures can also alleviate the apprehension of landlords that their properties might be squatted upon by tenants since the existing tenancy norms are in favour of tenants, whereby the eviction process becomes lengthy and cumbersome.
As per Census-2011, nearly 1.1 crore houses were lying vacant in urban areas because landlords were unwilling to give their premises for rent. On the other hand, there is a shortage of 1.88 crore urban houses estimated as per the report of the Technical Group on Urban Housing Shortage in 2012.
Whereas the overall population of the country grew by 17.64% during the decade 2001-2011, the urban population increased by 31.8% during this period. The challenge of providing housing for all cannot be solved without the provision of rental housing because owning a house is not practical every time. As per Census 2011, over 27% of urban residents of the country are living on rent, and most of them are informal in nature.
The problem of vacant houses is another issue. In fact, a total of 88,236 existing Government funded vacant houses are available to be converted into Affordable Rental Housing Complexes (ARHCs) for rental accommodation to migrants under Model-1 of the ARHC Scheme. In order to formalize this space and create a more accessible market, MTA 2021 was introduced.
An officer not below the rank of Deputy Collector will be the Rent Authority within his/her jurisdiction. It will have many of the same powers as the Rent Court and will be the first point of contact for both tenants and landlords. This authority will receive the tenancy form, which is mandatory under the act. It is also assigned the responsibility to set up a digital platform where the tenancy form is to be uploaded in a time-bound manner.
Creation of Rent Court and Rent Tribunal at the district level
The Rent Court is the primary source of appeal in any case of dispute covered under the act. It is governed by an Additional Collector or Additional District Magistrate or an officer of equivalent rank.
The Rent tribunal is the secondary source of appeal in cases where the petitioner is not satisfied with the Rent Court. It is governed by a District Judge or Additional District Judge.
The powers of the rent court and tribunal court are at par with the civil court in regards to the matters pertaining to the act, barring the civil court from entertaining any plea regarding matters pertaining to the rent court and rent Tribunal.
The powers of a rent court/tribunal include dispute settlement, eviction, protection from eviction, as well as enforcement of its orders with the help of police and local administration.
Most disputes must be resolved within sixty days, with the reason(s) for the delay provided if it exceeds the time limit.
Limited Security Deposit and No Cap on Rent Increase
A security deposit is limited to a maximum of two months’ rent in the case of residential housing and six months’ rent in the case of commercial housing, to be deposited with the Rent Authority.
There is no cap on hiking the rent, although it is governed by the terms of the agreement, and the landlord must give notice three months in advance of any such hike.
Failure to Pay Rent and Eviction
A tenant must vacate the house after the agreed period is over, if it is not renewed, or if the tenancy is terminated by notice or order issued under the provisions of the act. Failure to do so would attract a fine in terms of (a) twice the monthly rent for the first two months, and (b) four times the monthly rent thereafter till the tenant continues to occupy the said premises.
The tenant will be evicted if they have not paid the arrears of rent and other charges payable in full as specified in sub-section (1) of section 13 for two consecutive months, including interest for delayed payment as may be specified in the tenancy agreement within a period of one month from the date of service of notice of demand for payment of such arrears of rent and other charges payable to the landlord in the manner provided in sub-section (4) of section 106 of the Transfer of Property Act, 1882.
It is pertinent to mention that a tenant cannot be evicted in a case of force majeure, even if the tenancy is about to end imminently.
In the event of the death of the landlord, such rights and obligations would pass on to their legal heirs.
Safety Net for Tenants
No landlord shall withhold any essential supply or service in the premises occupied by the tenant.
The landlord cannot enter the house rented to the tenant without informing them in advance twenty-four hours before such a visit, and the visit has to be for reasonable reasons.
The landlord cannot enter the rented house before sunrise and after sunset.
If urgent repair or maintenance work is required, the tenant or landlord may carry out such work even if it is not their obligation and deduct the charges from the rent or security deposit, as applicable. There is an extensive list delimiting the maintenance responsibilities between the two.
Registration and Implementation
The act was aimed at simplifying the process of registration, but in the process, it has created unnecessary provisions which are cumbersome for both tenants and landlords. Its requirement of a PAN and an AADHAR card is unnecessary, and many lower-income groups may not have a PAN card in the first place. Although the act mandates that all new tenancy agreements be in line with the act, requiring formal registration with the Rent Authority, this is unlikely to happen unless some proper framework is provided for its implementation.
It would have been easier if the act had allowed the parties to upload the form themselves rather than giving it to the Rent Authority and having them, in turn, upload it online. Also, the digital platform has been mandated in vernacular language, but instead, it should also incorporate English and Hindi to it to make it more accessible. Apart from this, the fact that ‘‘land’’ is a state subject, its implementation is questionable unless the centre provides some incentives to the states who duly comply with the model act.
MoHUA wants the act to be enacted throughout the country by March 2024, but, as of now, few states have moved in that direction, one of them being Assam. Uttar Pradesh, Andra Pradesh, and Tamil Nadu have notified new tenancy acts based on the previous draft version and have been asked to align with the present act. The other states haven’t yet implemented the act.
Violation of Privacy
Since the act mandates that the tenancy form has to be uploaded online on the digital platform, this would violate the privacy judgement that the SC delivered in the Puttaswamy case. Apart from this, misuse of data by miscreants cannot be ruled out. This can be sorted out if the unnecessary details are left out, and the accessibility of online forms is limited to the government agency concerned rather than making it public.
Question of Affordability
One of the reasons to open up the rental housing market is to overcome the shortage of houses, which ownership-based houses alone cannot solve for. It is for the most lower strata groups that find it difficult to get houses at affordable rates, but the present act is silent on the question of affordability and has completely avoided that question altogether. Also, by not having any upper limit for rental hikes, the landlords are unjustly to benefit than required. Literacy issue is another concern, especially among the masses, they would again settle for informal arrangements than being formalized under the act.
No Anti-Discrimination Clauses
It is a known social fact that people of minority communities, or socially backward classes, including Muslims, Dalits, Queer community, or people having certain food choices, are straight away refused accommodation only on the basis of their social identity. It would have been a progressive step if the act had dealt with these social issues legally.
The Definition of Force Majeure Is Too Narrow
The definition of force majeure has been limited to natural causes, thereby excluding other events like riots, bandhs, blackouts, etc. It would have been much better to have a broad definition of force majeure rather than a very narrow one.
It is a welcome step that the government has tried to open up the real estate market by replacing archaic era laws, governing the rental market with new ones, properly delineating the rights and obligations of both tenants and owners, as well as providing a proper framework to redress their grievances in a time-bound manner. It would have been much better had the act looked at the issues raised above. But, nonetheless, it is a step forward, and experience will help make the necessary changes. The question of its implementation remains to be seen, although the present state is not very optimistic.
- (2021). 2021: A New Era for Rental Real Estate in India. Knight Frank and Khaitan & Co. Retrieved from https://content.knightfrank.com/research/2264/documents/en/a-new-era-for-rental-real-estate-in-india-indian-real-estate-residential-office-8206.pdf
- (2022). Annual Report 2021-2022 (MOHUA). https://mohua.gov.in/upload/uploadfiles/files/english-annual-report-2021-22.pdf.
- Dash, D. (2021, November 25). Centre to repeal Delhi Rent Control Act soon to bring a new law for the capital. Retrieved from The Times of India: https://timesofindia.indiatimes.com/city/delhi/centre-to-repeal-delhi-rent-control-act-soon-to-bring-a-new-law-for-the-capital/articleshow/87898766.cms
- Dubey, N., & Aggarwal, S. (2021, July 15). India: The Model Tenancy Act, 2021: Addressing The Inadequacies Of Rent Control Laws. Retrieved from https://www.mondaq.com/india/landlord-tenant–leases/1089306/the-model-tenancy-act-2021-addressing-the-inadequacies-of-rent-control-laws-
- Gulatee, A. (2021, October 7). The Model Tenancy Act, 2021: A Step Forward. Retrieved from SCC ONLINE: https://www.scconline.com/blog/post/2021/10/07/the-model-tenancy-act-2021-a-step-forward/
- Haidar, F. (2021, December 28). J&K first UT to adopt Model Tenancy Act, inks ₹19kcr realty deals. Retrieved from The Times of India: https://economictimes.indiatimes.com/news/india/jk-first-ut-to-adopt-model-tenancy-act-inks-19kcr-realty-deals/articleshow/88530638.cms
- Haque, I. (2022). Model Tenancy Act and its implications for unregulated private rental housing market. Retrieved from counterview.org: https://counterview.org/2022/03/10/model-tenancy-act-and-its-implications-for-unregulated-private-rental-housing-market/
- Kumar , S., & Sharma, K. (2021, August 10). India: Model Tenancy Act, 2021: A Mixed Bag. Retrieved from https://www.mondaq.com/india/landlord-tenant–leases/1100524/model-tenancy-act-2021-a-mixed-bag-
- Kumar, S., & Gupta, S. (2021, July 29). How the Model Tenancy Act can benefit homeowners and tenants. Retrieved from The Indian Express: https://indianexpress.com/article/opinion/columns/model-tenancy-act-homeowners-tenants-7427337/
- Livemint. (2021, June 28). Cities where owners prefer to keep their homes vacant instead of renting them. Retrieved from https://www.livemint.com/money/personal-finance/cities-where-owners-prefer-to-keep-their-homes-vacant-instead-of-renting-them-11624881942023.html
- Lok Sabha Secretariat (LARRDIS). (2021, March). Background Note on Housing and Urban Affairs. Retrieved from http://220.127.116.11/Refinput/Research_notes/English/08032021_150315_102120367.pdf
- Mahajan, A. (2021, July 18). The Model Tenancy Act, 2021 – Envisioning ‘Affordable Housing for All’. NLUJ Law Review. Retrieved from http://www.nlujlawreview.in/the-model-tenancy-act-2021-envisioning-affordable-housing-for-all/
- Manish, & Naik, M. (2021, June 8). The Model Tenancy Act, 2021: Falling short in catalysing the housing rental market. Retrieved from https://indiahousingreport.in/outputs/opinion/the-draft-model-tenancy-act-2021-falling-short-in-catalysing-the-housing-rental-market/
- MoHUA. (2015, October). National Urban Rental Housing Policy (Draft) – 2015. Retrieved from https://mohua.gov.in/upload/uploadfiles/files/National_Urban_Rental_Housing_Policy_Draft_2015.pdf
- Parmar , M., & Singh, D. (2021, August 27). The Model Tenancy Act, 2021 — Not the Best Role Model. IJPIEL. Retrieved from https://ijpiel.com/index.php/2021/08/27/the-model-tenancy-act-2021-not-the-best-role-model/
- PIB release. (2019, August 11). Model Tenancy Act aims to promote rental housing by balancing and protecting the interests of both the tenants and landlords. Retrieved from https://pib.gov.in/PressReleasePage.aspx?PRID=1744760
- PIB release. (2019, July 11). Model Tenancy Act(MTA) to Promote Growth of Rental Housing Segment by Regulating Renting of Premises. Retrieved from https://pib.gov.in/PressReleasePage.aspx?PRID=1578400
- PIB release. (2021, July 21). Affordable Rental Housing Complexes Scheme under Atmanirbhar Bharat Package. Retrieved from https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1740316
- PIB release. (2021, August 9). Meeting of Parliamentary Consultative Committee attached to MoHUA held. Retrieved from https://pib.gov.in/PressReleseDetail.aspx?PRID=1744257
- PRS India. (n.d.). The Model Tenancy Act, 2021. Retrieved from https://prsindia.org/billtrack/the-model-tenancy-act-2021
- Sagar, M. (2022, May 5). Chandigarh’s policy pangs: Endless wait for concrete tenancy reforms continues. Retrieved from Hindustan Times: https://www.hindustantimes.com/cities/chandigarh-news/chandigarhs-policy-pangs-endless-wait-for-concrete-tenancy-reforms-continues-101651696979434.html
- Sinha, S. (2021, June 28). Model Tenancy Act 2021 to create an effective rental marketplace in India: Report. Retrieved from The Indian Express: https://www.financialexpress.com/money/model-tenancy-act-2021-to-create-an-effective-rental-marketplace-in-india-report/2279665/
- (2021). The Advent of Rental Housing in India. CBRE India. Retrieved from https://www.cbre.com/insights/reports/india-report-the-advent-of-rental-housing-in-india
- The Model Tenancy Act, 2021. (n.d.). Retrieved from https://www.mohua.gov.in/upload/uploadfiles/files/Model-Tenancy-Act-English-02_06_2021.pdf
- The Times of India. (2021, August 14). Assam passes tenancy law to iron out disputes. Retrieved from https://timesofindia.indiatimes.com/city/guwahati/assam-passes-tenancy-law-to-iron-out-disputes/articleshow/85317302.cms
- The Times of India. (2021, July 9). Karnataka to soon adopt new Model Tenancy Act. Retrieved from https://timesofindia.indiatimes.com/city/bengaluru/karnataka-to-soon-adopt-new-model-tenancy-act/articleshow/84254413.cms
- Trehan, A. (2022, January 11). What is Model Tenancy Act? Will it make an impact in real estates sector? Retrieved from The Times of India: https://timesofindia.indiatimes.com/blogs/voices/what-is-model-tenancy-act-will-it-make-an-impact-in-real-estates-sector/
Read another policy update- POSHAN Abhiyaan, 2018-Policy Update 2021 in IMPRI insights.
Read another policy update- National Programme of Mid Day Meal in Schools in IMPRI insights.
Read another policy update- CROP INSURANCE SCHEMES-POLICY UPDATES 2021 in IMPRI insights.
About the Contributor:
Jay Patel, Research Intern at IMPRI and currently pursuing MA in Law, Politics and Society from The School of Law, Governance and Citizenship (SLGC), Ambedkar University Delhi (AUD)