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4 challenges Model Tenancy Act must overcome to provide affordable housing

An enabling environment requires a supportive ecosystem, which the current version of Modi govt's Model Tenancy Act is unable to provide.

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The Union Cabinet on 2 June 2021 approved the Model Tenancy Act, 2021 for all the states and union territories of India. The MTA is dovetailed to the vision of ‘Housing for All’ by 2022, and seeks to address fundamental imbalances in India’s rental ecosystem. Over the years, tenants have received protection through several rent control legislations across the country. Negligible increases in rent under these systems meant that landlords lacked income to maintain the properties, which, combined with a lengthy and litigious eviction process, destroyed any incentive for them to rent out properties. With formal rental housing largely dried up except in the higher market segments, affordable housing moved into the informal market, which is fraught with the very issues that the tenancy laws sought to address: no rights for tenants, predatory landlordism, excessive control, poor quality of housing, no system for redress, etc.

The Narendra Modi government’s Model Tenancy Act (MTA) seeks to resolve three problems with existing rent control regimes. First, it seeks to move from a framework of control to regulation. Second, it seeks to gradually formalise the existing rental housing market. And third, it seeks to create an enabling environment for the production of adequate affordable rental housing stock: particularly important in light of the introduction of the Affordable Rental Housing Complexes (ARHC) scheme in May 2020.

The MTA does fairly well on the first two issues, chiefly by enabling market-based determination of rents, with revisions incorporated into the rental agreement. Formalisation is envisaged through requiring rental agreements to be in writing and registered online. It is in the third step that the MTA falters: an enabling environment requires a supportive ecosystem, which the proposed legislation will be unable to provide. We list out four challenges that the current MTA draft will have to overcome to achieve this.

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No single institutional framework

First, the MTA does not establish a clear institutional framework and is beset with a bevy of overlapping and confusing processes. It envisages the creation of a Rent Authority, who is a designated official appointed by the Collector. The Authority’s proposed role is primarily to register lease agreements, which is currently being done by sub-registrars under the Registration Act, 1908. It is unclear why the MTA creates a new process and separate authority instead of amending the existing one.

The multiplicity of authorities continues with the creation of a Rent Court and a Rent Tribunal sitting in appeal over the court, while the Rent Authority is given coextensive powers with the court.

Further, despite these bodies functioning in urban areas, their appointment and oversight is left to the district administration instead of the urban local body concerned, violating the devolution envisaged under the 74th Amendment to the Constitution. Contrast this with another recent housing regulation law: the Real Estate Regulation Act, 2016, which creates a single streamlined institutional process while also recognising the authority of local bodies for planning and approvals.

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Repossession issue left unaddressed

Second, the MTA fails to adequately address a key issue with existing state-wise rent control legislations: the restrictive and cumbersome procedure involved in repossession of the rental premises. While the general bar on eviction has been removed, the process remains as restrictive as it was before: eviction can be carried out only on certain limited grounds, and that too after taking permission of the Rent Court. In the absence of a workable legal recourse to evict tenants, homeowners are still unlikely to have any incentive to rent out vacant homes.

A speedy, simple procedure that provides sufficient notice to the tenant to prevent arbitrary or illegal eviction would have helped. Rent Courts and Rent Tribunals should only function as a dispute redressal mechanism if the intent is to break out of the current framework.

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Equitable market access still a dream

Third, the MTA does not adequately ensure equitable access to the market for tenants. While the introduction of a mandatory “digital platform in the local vernacular language” may be intended to facilitate registration, it is unclear how it will overcome gaps in digital literacy and access, especially in the informal sector. The form for registering agreements also requires irrelevant documentation such as Aadhaar (despite no subsidy being provided) and PAN (irrespective of the amount of rent). This not only creates unnecessary paperwork, but also potentially violates privacy since the information has to be uploaded on the website. The mandate of vernacular language may also work to the detriment of migrant renters.

Besides these procedural shortcomings, the MTA also fails to substantively protect tenants from rental discrimination, commonly experienced by various groups including bachelors, unmarried couples, non-vegetarians, Dalits, religious minorities, transgender persons and sexual minorities. It is important to address this because the objective of ensuring adequate access to rental housing for all is only possible through a socially inclusive housing market.

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Excluding informal renters by design

Finally, the provisions of the MTA, as they stand, are geared to address the formal rental space and exclude informal renters. As outlined above, proposed registration mechanisms are unlikely to appeal to the  informal rental market, especially for lower-income groups. There is no penalty for not registering an agreement, and all subsequent provisions work only with a registered agreement. This will result in the informal rental sector being completely bypassed. The MTA would benefit from a broadening of its scope and coverage in order to address all categories of rental housing.

If it addresses these four issues, the central government has an immediate opportunity to show the way for states in adopting the MTA. Parliament exercises overriding legislative power in respect of the union territories, including the NCT of Delhi, which has one of the largest rental markets in India. Previous attempts at reforming rent control in Delhi failed due to their inability to consider the needs of all stakeholders, and the MTA offers a chance to address these imbalances. The introduction and passage of an amended MTA for the union territories (including Delhi) in the next session of Parliament could convince reluctant state governments of the viability of changing the rent control paradigms currently operational in the country.

Manish is a Research Associate and Mukta Naik is a Fellow with the Centre for Policy Research, New Delhi. Views are personal.

(Edited by Prashant Dixit)

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