New Delhi: The proposed model tenancy law will be instrumental in institutionalising rental housing in the country and tap huge potential in this segment as over 11 million homes are vacant in urban areas, a report said.
Property consultant Knight Frank India and law firm Khaitan & Co released an in-depth study 'Institutionalising the Rental Housing Market in India – 2019' which analyses the Draft Model Tenancy Act, 2019 announced by the Centre.
"India has nearly 11.09 million urban vacant housing units of which 10 states and Union Territories (UTs) contribute to 78 per cent (8.64 million) of total vacancy levels," Knight Frank said in a statement.
The proposed model law will be instrumental in institutionalising rental housing, which is largely unorganised in India, it added.
If rental housing is institutionalised with the introduction of a legal framework as envisaged, it will help in creating large purpose-built rental stock which can also attract institutional investments in the long run, the report suggested.
The Draft Model Tenancy Act, 2019 proposes to create a legal framework to bring harmony to the landlord-tenant relationships and balance the scale for both the parties.
However, the report said there are several areas from the perspective of both the parties where the Act provides no or limited clarity which can create challenges in its implementation.
This Act aims to bring stakeholders together and bring rental housing reforms to create an effective rental housing ecosystem in the country.
Currently, there are 21.72 million urban rented households in India. Tamil Nadu (16.5 per cent), Andhra Pradesh (13.8 per cent), Maharashtra (13.5 per cent), Karnataka (11.3 per cent), Gujarat (6.1 per cent), West Bengal (5.9 per cent), Uttar Pradesh (5.1 per cent) and the National Capital Territory (NCT) of Delhi (4.3 per cent) together command a substantial 76.5 per cent of total urban rented households.
The report advocates that the Draft Model Tenancy Act, 2019 when implemented will ensure the growth of institutional rental housing in India.
"As we move towards a more flexible work environment globally, there is a need for the Indian real estate sector too to envisage itself as a service, rather than a product. The addition of over 223 million new urban residents to the cities by 2031 will not be feasible if the rental housing market is not developed," Shishir Baijal, CMD, Knight Frank India said.
However, he said more debate was required to evolve the Model Tenancy Act into a meaningful, holistic and comprehensive piece of legislation.
Sudip Mullick, Partner of Khaitan & Co said, "Limited policy relating to rental housing and existing legislations unfriendly to landlords or owners of premise have been a big deterrent for creation of rental housing stock in the country."
The draft model law provides a much-needed independent mechanism specially engineered to deal with issues pertaining to rental premises, he added.
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