LegislationExamining the Model Tenancy Act, 2021 and regulation of rental property in IndiaShruti Gupta- June 10, 2021The Union Cabinet approvedthe Model Tenancy Act, 2021on June 2, 2021, for adoption by state and union territory governments.  The Model Act has threeprimary objectives.   First, itaims to regulaterenting of residential and commercial premises by establishing conditions for tenancy, eviction, and management of the property.Second, in regulating tenancy, itproposes mechanisms to balance and protect the rights of landlords and tenants.  Last, it proposes a three-tier adjudicatory mechanism consisting of Rent Authorities, Rent Courts, and Rent Tribunals for speedy adjudication of tenancy related disputes.However, note that rental housing is regulated by states as land, land improvement, and control of rents falls under the State List of theIndian Constitution.   This Model Actis only a proposed framework that states and union territories may alter when passing their own tenancy laws.In this blog, we provide a background on the rental housing market and explain some issues with the 2021 Model Act.Need for the ActIn India,95% of householdsin rural areas live in self-owned housing, and rental housing is a predominantly urban phenomenon.  Between 1951 and 2011, the urban population in Indiagrewby six times and as of 2011,comprises31% of the total population.  This isprojectedto grow to 40% by 2036.  However, the share of persons living in urban rental accommodation has decreased from 58% to 27% between 1961 and 2011.  The2015 draft National Urban Rental Housing Policynoted that urban areas face a significant housing shortage and stated that this cannot be addressed by home ownership.   In 2012, a Technical Group studying urban housing shortageestimatedthe urban housing shortage to be at 1.9 crore units.  The2011 Censusnoted that between 6.5 crore to 10 crore people (17% to 24% of the urban population) live in unauthorised housing in urban areas.  TheEconomic Survey (2017-18)noted that rental housing is a key way to address informality and shortage.  It stated that rental housing enables mobility and affordability for low-income segments, who may not be able to purchase housing.  It also observed that a significant portion of urban rental housing stock is vacant, attributing it to unclear property laws, poor contract enforcement, and rent control laws.State governmentsregulaterental housing through various legislative tools including rent control laws.  To prevent landlords from charging exorbitant rent and ensure affordable housing, these laws specify a ceiling on rent and put conditions on eviction of tenants.  The 2015 draft Policynotedthat rent control laws discourage private investment in rental properties.  It observed that rent control laws also skew arrangements towards tenants and lead to more litigation.  This haserodedthe trust of landlords in the regulatory system.  A significant share of the rental demand is addressed through alternate arrangements such as leave and license agreements and informal leases.A model law to regulate tenancy was first proposed in1992.  The first draft Model Tenancy Act was released in2015, which was adopted byTamil Nadu.  However, as of 2021, 20 states includingKarnataka,Maharashtra, andWest Bengalcontinue to have rent control laws.  A few states includingMadhya Pradesh,Jharkhand, andChhattisgarhhave repealed their rent control laws.Besides its key objectives, the Model Act also seeks to ensure affordability, formalisation and increase private investment in the rental housing market.  The framework proposed under the Model Act may address some of these concerns.  However,expertshave recommended supplementing this with other policy initiatives to meet these objectives.For instance, a 2012 Technical Groupobservedthat about 96% of the urban housing shortage pertains to the Economically Weaker Sections (EWS) and Lower Income Group (LIG) categories.  The 2015 draft Urban Rental Housing Policynotedthat a repeal of rent control laws may increase private investment and availability of rental housing.   However, it has recommended several other measures to ensure affordability of rental housing.  These include:(i) provision of incentives such as tax exemptions and subsidies to tenants and home owners, (ii) encouraging public-private partnerships and residential rental management companies, and (iii) enhancing access to finance within the EWS and LIG sectors.Concerns for right to privacyThe Model Act requires all landlord and tenants to intimate the Rent Authority about a rental agreement with a prescribed form.   The form requires both the tenant and the landlord to submit their Aadhaar numbers and attach self-attested copies of the card with the form.  This may violate a 2018 Supreme Courtjudgement, which states that requiring Aadhaar card or number can be made mandatory only for expenditure on a subsidy, benefit or service incurred from the Consolidated Fund of India.  Registering a tenancy agreement does not entail these, therefore making Aadhaar number mandatory for registering a tenancy may violate the judgement.The Model Act also states that tenants and landlords will be provided with a unique identification number after registering a rental agreement.  Details of the agreement along with other documents will be uploaded on the Rent Authority’s website.  It is unclear if personal details of the parties such as PAN and Aadhaar number, which must be submitted along with the agreement, will also be made available publicly.  If these are shared on the website, this may violate the right to privacy of the involved parties.  The Supreme Court hasincludedthe right to privacy as a fundamental right.   This right may be infringed only if three conditions are met: (i) there is a law, (ii) the law achieves a public purpose, and (iii) the public purpose is proportionate to the violation of privacy.   Sharing personal information of individuals may not serve a public purpose, and hence may violate the right to privacy of such individuals.Dispute redressalThe preamble ofthe 2021 Model Actand thebackground noteaccompanying the 2020 draft Model Act state that it seeks to establish a speedy adjudication mechanism for disputes linked to tenancy agreements.  The Model Act specifies the timelines for resolution of cases linked with eviction and payment of rent.  However, timelines have not been specified for certain cases.  For instance, no timeline has been specified within whichthe Rent Authority must resolve a dispute on withholding of essential services or revision of rent.Specification of minute detailsTheModel Actseeks to balance the tenant-landlord relationship by specifying rights and duties of both parties.  However, it also caps the maximum possible security deposit amount that a tenant must pay to the landlord.  Further, a suggestive framework for the rental agreement also includes minute details on responsibility for repair and maintenance.  If codified, these specifications may hinder flexibility in framing tenancy agreements.For a PRS analysis of the Model Tenancy Act 2021, please seehere.Read MoreParliamentFirst no-confidence motion of the 17th Lok Sabha discussed todayNiranjana Menon- August 8, 2023Discussion on the first no-confidence motion of the 17thLok Sabha began today.  No-confidence motions and confidence motions are trust votes, used to test or demonstrate the support of Lok Sabha for the government in power.  Article 75(3) of the Constitution states that the government is collectively responsible to Lok Sabha.  This means that the government must always enjoy the support of a majority of the members of Lok Sabha.  Trust votes are used to examine this support.  The government resigns if a majority of members support a no-confidence motion, or reject a confidence motion.So far, 28 no-confidence motions (including the one being discussed today) and 11 confidence motions have beendiscussed.  Over the years, the number of such motions has reduced.  The mid-1960s and mid-1970s saw more no-confidence motions, whereas the 1990s saw more confidence motions.Figure1: Trust votes in ParliamentNote: *Term shorter than 5 years; **6-year term.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.The no-confidence motion being discussed today wasmovedon July 26, 2023.  A motion of no-confidence is moved with the support of at least 50 members.   The Speaker has the discretion to allot time for discussion of the motion.  TheRules of Procedurestate that the motion must be discussed within 10 days of being introduced.  This year, the no-confidence motion wasdiscussed13 calendar days after introduction.  Since the introduction of the no-confidence motion on July 26, 12 Bills have been introduced and 18 Bills have been passed by Lok Sabha.  In the past, on four occasions, the discussion on no-confidence motions began seven days after their introduction.  On these occasions, Bills and other important issues were debated before the discussion on the no-confidence motion began.Figure2: Members rise in support of the motion of no-confidence in Lok SabhaSource: Sansad TV, Lok Sabha, July 26, 2023; PRS.Figure3: Number of days from introduction to discussion on no-confidence motionsNote: Number of days implies calendar days.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.On average, no-confidence motions (excluding the one being discussed today) have been discussed for 13 hours over three days.  Discussions have lasted longer than 20 hours on four instances, most recently in 2003.  Today’s no-confidence motion was allotted 12 hours discussion time by theBusiness Advisory Committee.Following the discussion, the motion is put to vote.  26 out of 27 no-confidence motions (excluding the one being discussed today) have been voted upon and rejected.  This means that no government has ever had to resign following a vote of no-confidence.   On one occasion, in 1979, the discussion on a no-confidence motion against the Morarji Desai government remained inconclusive.  He resigned before the motion was put to vote.  50% of all no-confidence motions (14 out of 28) were discussed between 1965 and 1975.  Of these, 12 were against governments headed by Indira Gandhi.Figure4: Duration of discussion on no-confidence motionsNote: This graph excludes the no confidence motion moved on July 26, 2023.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.In comparison, confidence motions have a more varied history.  The first motion, brought in 1979 to demonstrate confidence in Charan Singh’s government, was not discussed at all.  The Prime Minister resigned before the discussion could take place.  Since then, 11 confidence motions have been discussed in Lok Sabha, with nine occurring in the 1990s.  During this period, several coalition governments were formed, and Prime Ministers sought to prove their majority throughconfidence motions.   These motions have been discussed, on average, for 12 hours over two days.Figure5: Duration of discussion of confidence motionsSource: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.Of the 11 confidence motions discussed in Lok Sabha, seven were accepted.  On three instances, governments had to resign as they could not prove that they had the support of the majority.  On one instance in 1996, the motion was not put to vote.  Following an eleven-hour discussion on this confidence motion, Prime Minister Atal Bihari Vajpayee announced his intention to resign on the floor of the House.  He resigned 16 days into his term.Vajpayee became Prime Minister again in 1999, and faced another confidence motion.   This time, it was put to vote.   The motion was defeated by a margin of one vote.  This has been the closest result on a trust vote in the history of Lok Sabha.  The next closest result was when a motion of no-confidence against P V Narasimha Rao’s government was defeated by 14 votes in 1993.  In most cases, results have been in favour of the government by a large margin.«12345678910»
LegislationExamining the Model Tenancy Act, 2021 and regulation of rental property in IndiaShruti Gupta- June 10, 2021