The Indian government on June 2 approved the Model Tenancy Act (MTA) 2021, which is being considered as a watershed moment in the Indian real estate sector. For residential real estate investors, one of the biggest advantages is that a rental situation is only possible with a written agreement and there is more to this new act as well.
Although states have existing laws that deal with renting and leasing of properties, the MTA is likely to replace the Rent Control Act of states if they wish to.
While the MTA is aimed at boosting the confidence of landlords to rent out their vacant properties, it will also escalate non-resident Indian (NRI) investment. It is a great assurance for NRI investors that the tenants who have rented out their property are bound by legal terms. Furthermore, the act defines a timeline within which rental disputes must be resolved.
It also offers a digital platform where tenancy-related agreements have to be submitted to the landlord in the future. As digital infrastructure is more convenient, the MTA will add more layers of transparency between NRI landlords and tenants.
A Massive Safety Net
NRIs always prefer to invest in Indian real estate. However, NRIs significantly have been uncertain about ensuring that tenants agree to the terms and conditions of the rental agreements and follow them in letter and spirit. The process of finding a tenant and collecting the dues is generally carried out by family or close associates of the NRI.
As the rental sector gets more organized, institutional service providers have emerged to address the market demands. The increased trust and confidence of NRIs will easily push them to monetize their existing vacant residential properties by arranging them in a coherent, cohesive, and more organized manner.
The past two quarters have recorded significant traction of ready-to-move inventories in the prime residential markets of India. The new regulatory framework is likely to provide an extra impetus to this demand. The prices of ready-to-move-in (RTMI) properties are expected to go up quickly with the implementation of the MTA.
This Act is extremely beneficial for the NRI investors, considering the current situation as currency rates are favorable, rates for a home loan are at an all-time low and real-estate prices have become reasonable. These would motivate developers to keep on offering good deals.
With these, the regulatory framework for rental homes is now being reinforced and becoming more transparent. Therefore, the time is ripe for NRIs to invest in Indian real estate as it is bound to provide them a sustained source of income.