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ET EDIT-Reform of Tenancy Laws a Necessity Outdated tenancy laws harm housing supply

July 20, 2019 06:43 AM


Reform of Tenancy Laws a Necessity
Outdated tenancy laws harm housing supply
As India rapidly urbanises, states must repeal obsolete tenancy laws that keep rents low, prevent owners from spending money on maintenance of old structures and curb the growth of rental housing. States must have tenancy laws that allow rents to be charged at market rates, with safeguards, to boost housing. In the country’s commercial capital, Mumbai, the situation is absurd: rents, say, in pre-1969 buildings even in upmarket areas such as Marine Drive, can be as low as ₹200-300 per month. Irrational provisions in the law have led to a huge gap in the supply of urban housing, resulting in the mushrooming of slums that need to be regularised periodically. Attempts by the state government to amend the Maharashtra Rent Control Act have not met success so far. Low rents disincentivise investment in maintenance, leading to unsafe buildings and urban decay.

Owners of property in commercial hubs in Delhi also earn paltry rents. Reportedly, the repealed Delhi Rent Control Act, 1995 — that would have made tenants pay higher rents — could not be enforced as the government did not notify it. The Model Tenancy Act, 2019, drafted by the Centre, seeks to address the rigidities in the distorted rental market that would help boost housing stock and modernise the rental market. This is welcome. The proposed law outlines the obligations of tenants and landlords, prescribes norms that enforce rental contracts and proposes an adjudication mechanism for quick settlement of disputes. It lists the type of repairs each party would be responsible for. The proposed rent authority must be informed about the rental agreement within two months of its signing. States should move swiftly on the legislation and set up the relevant authorities.

Reforms are needed in the land market to make construction of rental housing in urban areas viable. Land prices today are unreasonably high due to the artificially constrained supply of land. This must be addressed, and the release of urban land calls for a coherent policy to make farmers stakeholders in urban prosperity. Rent laws should not impede India’s urbanisation.

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