A regulatory framework is now active in India, which brings a transparency in renting the house. NRIs have a great opportunity because this law regulates rental conditions through a written agreement.

What is the Model Tenancy Act?

According to this law, no person can rent out any premises without agreeing in writing. It means that the letting out the property on rent will be possible only when you have a written-agreement. It bring a great opportunity for NRIs also who want to invest in the property for a sustainable rental income.

However, this law is formed to overcome the drawbacks of the local rent control Acts. The outdated law was unable to standardize the rent in the local market. The Census 2011 showed that more than 1 crore houses were vacant in urban areas. The reason was a massive up and down in the rental money and no transparency and accountability in the existing system. Even, non-residents of India were not able to rent out their property because of this fear. 

The States and Union Territories have MoUs with the Centre under the Pradhan Mantri Awas Yojana-Urban, which includes this provision.

In the nutshell, the government wants to formalize the rental housing by assuring that the property is safe through this refined law. It will certainly increase rental income and reduce the practice of illegally making others’ property as their own or not paying rent amount. In addition, registration procedure will be simpler, easier and transparent.   

The Ministry of Housing and Urban Affairs has announced that the states can adopt this Act because it is upgraded and beneficial for them to promote renting practices, which can be a good income source for the state government also (like NRIs). This Act will create a discipline and make every condition crystal clear. The tenants will be more accountable to pay off the amount. This is how it will balance out the interest of both, the property owner and the tenant in a legal term. 

The Union Cabinet has approved this law, which is likely to prove a landmark in the history of real estate market.

Summarised Points of the Model Tenancy Act

• The residential real estate investors will not be able to give their property on lease. If they want, a written agreement will be needed.
• The agreement will be bound by legal terms.
• The timeline will be predefined within which any rental disputes or conflicts should be resolved.
• These legalities will be done on a digital platform, where tenancy agreements should be submitted to the rent authority. However, it will be possible in the coming months.
• The digital platform will be convenient and come with an added layer of transparency of owners and NRI landlords.
• The written agreement will have a clear instruction and defined limits of responsibilities between a tenant and the landlord. 

Benefits for NRIs

• Now, NRIs won’t face any uncertainties around tenant and property management. They can easily do so through an attorney. They can talk to an NRI property consultant about how to apply for power of attorney in India, define the rental conditions and that’s all!
• If they want, the entire process of finding a tenant and collecting dues can be done with the help of family and close relatives in India.  
• The market will be more organized, the government bodies will be more powerful to address the market demand and the law will be able to protect the rights of both (landlords and tenants). 
• NRIs can easily monetize their vacant residential properties in a manageable way.
• They can have a sustainable source of income.
• They can have loan on a very low-interest rates and the currency exchange rate is also very low these days.

All these happenings will encourage rental situations. The price of properties is likely to increase soon.

As per ANAROCK Research, over 4.22 lakh homes are scheduled to be ready by 2021-end. Only 28% of these homes are not sold. It means that 72 % of the homes are sold out despite the fact that pandemic is adversely impacting all sectors around.

Most of these houses are affordable and are about to complete soon. Around 40% of these is priced less than INR 40 lakh and 35% have the price in between INR 40 to INR 80 lakhs. Simply put, the NRIs and property owners can have a great scope of generating income through residential assets. The rates remain affordable, as the developers come with heavy discounts for the serious buyers.