The Union Budget has proposed a Model Tenancy Act to give a fillip to rental housing in India, where over 11 million houses were lying vacant as per the 2011 Census. The draft rent rules include capping the security deposit at just two months' rent (against the norm of 10 months in most Tier 1 cities), heavy penalties for failure to vacate, and a notice of three months before the house owner revises the rent.
While the measures are aimed at encouraging renting over ownership to utilise vacant houses, the proposed Act may meet with limited success as most such houses are in far flung areas where infrastructure is not well developed. Moreover, land is a state subject. So, if states decide to drastically modify proposals, the Act may be rendered ineffective. As things stand, only stringent measures on fast-tracking dispute resolution between tenants and owners can really promote rental housing.