Guest Column

Model Tenancy Act brings cheer to NRIs

The Union Cabinet’s approval for the Model Tenancy Act is being hailed as a landmark moment in Indian real estate. In one of the most significant developments for residential real estate investors, no one will henceforth be allowed to enter into a rental situation without a written agreement – and that’s not all.

Aimed at increasing confidence of landlords to rent out their vacant properties, this Act will serve as booster for NRI investments. For an NRI investor, it is a great assurance that the tenant of their property is bound by legal terms. Further, the act defines the timeline within which any rental disputes will be resolved.

The new law also calls for a digital platform where tenancy agreements need to be submitted to the rent authority in future. Digital infrastructure is more convenient and brings an added level of transparency for NRI landlords. With this Act, there is now a clear demarcation of responsibilities between a tenant and landlord.

NRIs have always shown a keen interest in investing in Indian real estate. However, the uncertainties around ensuring that tenants uphold the terms and condition of the rental agreements were, so far, significantly high for NRIs. The entire process of finding a tenant and collecting the dues is usually carried out by family or close associates in India.

With the rental market now becoming more organized, institutional service providers will come into the picture to address the market demands. The increased trust and confidence thus generated will enable NRIs to easily monetize their existing vacant residential properties by letting them out in a coherent, cohesive, and easily manageable way.

The last two quarters have seen significant traction of ready-to-move inventories in India’s prime residential markets. The new regulatory framework will provide additional impetus to this demand. With the implementation of the Model Tenancy Act, prices of RTMI properties are expected to increase soon.

As per ANAROCK Research, over 4.22 lakh homes are scheduled for delivery by 2021-end. It is interesting to note that only 28% of these homes are unsold as on date. Going by the burgeoning demand for ready homes, developers will continue to be mindful of adhering to delivery schedules despite the impact of the pandemic’s second wave – which is already showing signs of abating.

Most of these near completion units are in the mid-range and affordable segments. 40% of the stock is priced less than INR 40 lakhs and 35% is priced between INR 40 to INR 80 lakhs.

With very low interest rates and the currency exchange rate still very much on the side of NRIs, this is indeed a promising time for those with an eye of income-generating residential assets. Property rates remain range-bound and developer offers and discounts are still available for serious buyers.

With the regulatory framework for rental homes now also being strengthened and rendered increasingly transparent, it is the perfect time for NRIs to invest in Indian real estate for sustained rental income.