Apartment buildings in Palava City, Mumbai. India’s real estate market is going through a transformation, with recent moves empowering property buyers in unprecedented ways. Image Credit: Bloomberg

India’s rental housing market, trammelled by archaic laws and ambiguity, is adapting to the pragmatism as outlined by Finance Minister Nirmala Sitharaman in her Budget speech.

The proposed regulations for the real estate sector have since made way into the Model Tenancy Act 2019, drafted by the Ministry of Housing and Urban Affairs, which addresses the relationship between the landlord and tenant realistically.

The new law limits the security deposit to two months’ rent and lists penalties for tenants overstaying and not adhering to the contractual terms of their rental agreements.

An overstay will cost a tenant twice the rent for the first two months, then quadruples in subsequent months. However, during such a period, the landlords are not allowed to cut off essential utilities like water and electricity.

The Act also talks about creating special courts to deal with disputes between tenants and landlords and puts the obligation of carrying out repairs, maintenance and upkeep of the property on the owner.

While the landlord cannot increase the rent during the middle of the tenancy contract, the tenant in turn cannot sublet the premises without prior consent of the owner.

The Act aims to increase accountability in alignment with the government’s development plans in the housing sector. The central government has left it to the states to implement the Act or to amend it in accordance with existing rental laws.

Some flexibility at the state level

The Maharashtra government has decided to enact it for new constructions and introduce an amendment that protects properties governed by the Maharashtra Rent Control Act 1999.

Landlords have dominated the real estate business in India for far too long, especially in Mumbai, the only Indian city to feature in a Top 20 list of expensive residential markets in the world.

In Mumbai, a real estate agent’s opening and closing has always been about what the owner wants — demands, rather — and barely skimming the surface of what a tenant wants, barring the monthly rent and astronomical security deposits.

The broker is almost always submissive to an owner’s preferences, despite the tenant being as much a paying customer as the landlord.

This dynamic needs to change towards a balanced equation between tenants and landlords. Tenants need to rent and owners need their money — it’s a simple business deal and it’s about time it’s conducted like one.

The realty business in India is inescapably going to change with the Act, giving impetus to luxury rentals at the expense of buys. The biggest incentive is the security deposit being restricted to two months’ rent. The Mumbai rental market stands to gain the most from the new Act.

Luxury rentals are far more fiscally appealing with the new Act coming into play. The Act increases the security for landlords and tenants, leaving minimum room for legal discord.

Landlords will have to desist from imposing delusional demands on a tenant like sky-high security deposits and tenants will legally bound to pay hefty fines for overstay and misuse of a rented property.

Rubina A Khan is a Mumbai-based writer.