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The Union Cabinet on Wednesday approved the Model Tenancy Act with an aim to balance the interests of homeowners and tenants. The Act, which is now open for enactment by states and Union Territories (UTS), will encourage homeowners who were cautious of renting out their properties under the older tenancy and rent-control Acts, the government said.
Renting out any property in both urban and rural areas without a written agreement is now illegal. This will help formalise the shadow market of rental housing, unlock vacant properties, increase rental yields, and reduce procedural barriers in registration.
While it restricts eviction during the tenancy period, the Act requires tenants to continue to pay the rent even during the pendency of a dispute with a landlord. In the case of force majeure, the landlord will have to allow the tenant to continue in possession till one month from the date of cessation on the terms of the existing tenancy agreement.
According to the Ministry of Housing and Urban Affairs, currently, some 11 million homes are vacant in urban areas as landlords are unwilling to let these properties due to lack of protective measures in current laws. The new Act will bring enough protection for owners, which will encourage them to rent out these properties now, said industry experts.
Welcoming the move, Anuj Puri, chairman, Anarock Consultants, said it will help bridge the trust deficit between tenants and landlords "by clearly delineating their obligations and will eventually help unlock vacant houses across the country".
According to him, it has the potential to fuel the rental housing supply pipeline by attracting investors.