The Model Tenancy Act, 2021 is intended to give a new lease of life to the real estate rental business in India. We discuss the regulatory reforms sought to be achieved by the new model law.
Prithvi GM Associate
The Union cabinet has approved the Model Tenancy Act, 2021 (MTA), to set the wheels in motion for establishing a regulatory mechanism for the real estate rental business - one of India’s largest unaccounted and largely unregulated markets.
With India’s growing market potential, increased inflow of foreign investment, rapid urbanization, large scale migration, education and rise in population/employment, there is high potential in the growth of both demand and supply in India’s rental sector. However, this has largely remained untapped due to non-existing, outdated or inadequate rent laws, which in turn has resulted in an environment where informal arrangements have inhibited the growth of India’s rental market.
In this backdrop, the long-awaited approval of the MTA with its objective to (i) regulate the renting process; (ii) protect and balance the interests of landlords and tenants; and (iii) set up a speedy dispute resolution mechanism, is a step in the right direction.
The MTA will operate without any kind of pecuniary limitation in terms of its applicability.
With the establishment of this three-tier adjudicatory system, the MTA bars the jurisdiction of the civil courts and the general applicability of the Civil Procedure Code, 1908, allowing the rent courts/tribunals to be guided by principles of natural justice. While this is intended to ensure speedy adjudication, the efficacy of this system will depend heavily on how well it is implemented by an already overburdened state administration.
Further, the MTA allows the appointment of non-judicial officers such as deputy collectors/additional collectors to carry out judicial duties for the rent authority/court. This can be challenging, especially in jurisdictions such as Maharashtra where small causes courts have exclusive first jurisdiction on rent matters.
Lastly, the MTA is silent on alternate dispute mechanisms such as arbitration which have become integral to speedy resolution of landlord-tenant disputes. However, going by the precedent set by the three-judge bench of the Supreme Court of India in Vidya Drolia vs. Durga Trading Company, should the MTA be implemented in a particular State, landlord-tenancy disputes in that State may no longer be arbitrable as they would then be covered by the special judicial regime created under the MTA.
The MTA aims to even the playing field by catering to the needs of the landlord as well.
After India’s largely successful attempt in tackling the developer and consumer/homebuyer market with the implementation of the Real Estate (Regulation and Development) Act, 2016, the MTA is the logical next step for the government to regulate the real estate sector. It will however be interesting to see how it is implemented by State governments for their specific needs and whether it sets up a conducive regulatory ecosystem for India’s rental sector. While Tamil Nadu had passed a new rent law in 2017 in line with an earlier version of the MTA (i.e., the Draft Model Tenancy Act, 2015), Uttar Pradesh promulgated a new tenancy ordinance in line with the MTA earlier this year. Assam recently adopted the MTA in August 2021 and reports indicate that Karnataka and Gujarat are likely to follow suit.
With the advent of new models of ownership such as fractional ownership of high value assets and establishment of real estate investment trusts, which are highly reliant on rental profits for their return on investments, the MTA is a regulation which can have the most defining impact on the real estate sector.
Corporate Criminal Investigations
