Editorial: Rewriting India’s rental rules
At a macro level, there is a compelling case for developing a well-regulated rental housing market, especially in cities that are engines of economic growth.
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• Billed as one of the most important government interventions in the rental housing market, the New Rent Rules 2025 is set to regulate a complex, highly diverse, burgeoning and hitherto under-regulated sector. For years, there has been a felt need to bring some accountability and oversight to a market where both owners and tenants could get away with fraud. It was widely believed that property owners were becoming a law unto themselves and dictating arbitrary terms. Likewise, tenants were defaulting on rent or squatting on valuable property through endless litigation. The rules, based on the Model Tenancy Act (MTA), 2021, are a welcome intervention that seeks to provide a modicum of clarity and uniformity in a manner fair to both owners and tenants.
Rent agreements were a source of vexatious and frivolous litigation. This issue is addressed through mandatory registration within 60 days of signing the agreement. To make it convenient and cut bureaucratic red tape and consequent harassment and corruption, a provision has been made enabling online registration. Besides being legally binding, neither party will have the undue advantage to cheat or commit fraud. Likewise, there will be less scope for misunderstanding, multiple interpretations and loopholes. To ensure compliance, there is a reasonable penalty for failure to register.
It is reasonable for owners who allow tenants to occupy property worth several lakhs and even a few crores of rupees to demand a security deposit to protect themselves from unpaid rent and costs arising from damage beyond usual wear and tear. In cities where demand for rentals is high, tenants are arm-twisted into paying steep deposits — equivalent to ten months’ rent or more. For many properties in major cities, this can run into lakhs of rupees. By reducing the security deposit to two months’ rent, the new rules ease the burden on tenants, especially early-career employees, students living away from home and families from economically disadvantaged classes. The authorities should ensure that owners do not circumvent this by increasing rent to compensate for the interest lost through lower deposits.
Another major grouse of tenants has been rent hikes by owners at will. Under the new rules, owners can raise rent only once in 12 months, and that too after serving a written notice of 90 days. The owner also needs to follow the rules for eviction. Now owners must obtain an official order from the relevant tribunal. While this provision is important for tenant protection, it is vulnerable to misuse by unscrupulous tenants with mala fide intentions. This can be a nightmare for owners who are ordinary citizens without clout or muscle power. A major safeguard is that State Rent Courts/Tribunals are required to give their decision within two months.
At a macro level, there is a compelling case for developing a well-regulated rental housing market, especially in cities that are engines of economic growth. People likely to live in a city for long periods of their working lives should be provided with financial support, including cheaper loans, to buy homes. Affordable housing should be made available to the urban poor. For the rest, there should be a fair and accessible rental market, and the new rules could pave the way for organised and institutional players to develop new properties.
