The government will approve the model tenancy law in the next one month and then send it to states/UTs for adoption, a reform aimed at boosting rental housing, Housing and Urban Affairs Secretary Durga Shanker Mishra said on Wednesday.
Addressing a Assocham webinar on the housing sector, he said the Centre would encourage states/Union Territories to adopt this model law. He hoped that they would pass necessary legislations over the next one year.
"We are bringing a very big reform. We are changing the tenancy law," Mishra said.
The secretary pointed that the present tenancy laws in various states were skewed towards safeguarding the interest of tenants.
As per the 2011 census, Mishra said, 1.1 crore homes were vacant as people fear giving them on rent.
The secretary said the model tenancy law will be approved in a month by the competent authority.
Mishra said his ministry would ensure that within one year every state passes legislation to implement this model law.
The secretary said the model law provides for rent transactions on agreements and dispute resolution system.
"We hope that 60-80 per cent of the vacant flats will come into rental market once this law is implemented," he said, adding that the real estate developers could also convert their unsold inventories into rental housing.
The ministry had in July 2019 floated the draft model tenancy law, which proposes that landowners will have to give a notice in writing three months before revising rent. It advocated appointing a district collector as rent authority and heavy penalty on tenants for overstaying.
Talking about the newly launched Affordable Rental Housing Complexes (ARHC) scheme, Mishra said the programme aims to convert lakhs of vacant flats owned by the Centre and states into rental housing for migrant workers at a very cheap rent.
Finance Minister Nirmala Sitharaman had announced the ARHC scheme as part of the over Rs 20-lakh crore economic package to deal with the COVID-19 crisis. Last month, the housing ministry issued guidelines to implement ARHC in the country.
"We want to bring vacant homes owned by the central, state and urban local bodies into this scheme and provide affordable rental housing to migrants/urban poor," he said.
Mishra highlighted that ARHC also encourages private players to participate in this scheme by giving extra developable area (floor area ratio) to them. Subsidy wll be given for adoption of innovative construction technology. Interest rate will also be lower.
The secretary said the scheme would generate a return of 13 per cent to make it financially viable.
Mishra assured the industry that he would look into their suggestions to make this scheme more attractive.
To make ARHC scheme tax efficient and boost investment in rental housing, Naredco President Niranjan Hiranandani demanded accelerated depreciation and increase in rate of standard deduction and enable private players as well as financial institutions to earn decent return.
Property consultant Anarock Chairman Anuj Puri said rental housing offers great opportunity, but to encash that tenancy laws need to be reformed.
He said many large corporates and companies like Signature Global have entered into affordable housing segment and the same could be replicated in rental housing.
Last month, the Union Cabinet approved the ARHC scheme, under which existing vacant government-funded housing complexes will be converted into affordable rental housing complexes through "concession agreements" for 25 years. ARHC is a sub-scheme under the Pradhan Mantri Awas Yojana-Urban.
The concessionaire will make the complexes livable by repair or retrofit and maintenance of rooms and filling up infrastructure gaps such as water, sewer, sanitation, road and related work.