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POLICY REVIEW
earlier, in case of low-income to establish state-level rent the MTA also needs to be
households, rental arrangements authorities and tribunals, complemented with other policy
might not be backed by a written should be finalised, adopted and interventions that would make
contract and in cases where there implemented by states. Some the economics of formalised
is a written contract, it might not changes are being proposed rental agreements affordable.
have legal validity. here. The recommended cap on Rules and regulations for
Though these poorly regulated security deposit as suggested in commercial and residential rental
rental markets function as per the MTA should be dropped in its agreements should be separate
the market forces of demand and initial run, to encourage all rental since their purpose, scale of
supply, the market conditions agreements, both prospective rental returns and stakeholders
are far from ideal. Such markets and retrospective, across all involved, are markedly different.
protect the interests of neither formal housing to be formally Instead of equating rental deeds
the tenants nor the landlords. registered. The initial objective to conveyance deeds, the stamp
While tenants worry about must be to bring all rental units duty and registration charges
sudden eviction, unjustified in formal residential properties payable on housing rental
rent increase, harassment by across India’s cities, under the agreements should be preferably
landlord while refunding purview of a formalised and at a much lower rate than those
security deposit or paying for regulated rental market. The on sale deeds. Payment processes
repairs etc., landlords worry well-intended provision that for these charges should be
about tenants not vacating and caps security deposit to two simple with one-step online
claiming ownership of property, months’ rent may not find portals. Tax breaks on income
and the inability to increase rents acceptability among landlords. from rental units, in particular
to match market realities. So, such measures may be those catering to the EWS and
introduced later once the initial LIG households, could reduce
Taking note of these challenges, objective is realised. Parallelly, the tax avoidance behaviour by
the Union Government had the MTA should extend to all landlords that leads to informal
come out with the Draft Model forms of rental agreements rental agreements.
Tenancy Act, 2019 in July last including ‘leave-and-license’
year, seeking public opinion on agreements, the pagdi system, Second, the government should
the same. Housing being a state homestays, PG housing and discourage house purchases
subject, one of the mandatory other professionally managed for speculative gains. Fiscal
requirements of PMAY-U was residential properties. Also, the incentives such as exemption
for states to amend or legislate unique registration number from capital gains tax on re-
their rental laws based on this to be allotted to all registered investment of the gains from the
model act. Next, we discuss agreements as per the MTA could sale of one house in the purchase
the immediate and long- further be linked to House Rent of another two houses within a
term measures that should be Allowance (HRA) tax exemption stipulated period should be re-
implemented for an efficient for salaried tenants. This would examined in terms of their effect
rental housing sector in the make registration of rental on promoting universal access
context of the MTA. agreements both necessary and to housing. Levying vacant
house tax could increase the
MTA - Measures for the popular. supply of rental housing and
immediate future MTA - Over the longer term housing access and discourage
The MTA with its provisions First, over the longer term, speculative investment in
housing.
October 2020 Volume 21 No. 2-SHELTER 57
