Non-Resident Indians may benefit from the Model Tenancy Act 2019 - GulfToday

Non-Resident Indians may benefit from the Model Tenancy Act 2019


Rental yields are not lucrative for residential property in India and it ranges from 3% and above.

V Nagarajan

With India’s population expected to touch 1.52 billion in 2036, housing is becoming a major challenge. The urbanisation rate is also likely to reach 40 per cent by 2036. Despite the laudable efforts and the ambitious scheme of Housing for All by 2022, India continues to remain as a housing deficit country.

In a paradoxical situation, while the housing shortage continues to grow, there are thousands of apartments lying vacant in metros due to the fear of landlords of not getting it back when they need it and the decade old archaic rent control laws awaiting reforms with protracted legal battle to retrieve the property.

Rental yields are not lucrative for residential property and it ranges from 3 per cent and above. Hyderabad tops the list with a rental yield of 3.7 per cent. In Bengaluru it is 3.6 per cent, Pune 3.3 per cent and in entire MMR - surprisingly – it is just 3 per cent, according to Anarock survey.

 The survey reveals that overall share of rental housing could be anywhere between 35-45 per cent of the total Indian residential real estate segment. It accounts for nearly 70 per cent of the total rental market. As per IMF’s last estimate two years ago, India’s residential rental market was worth more than $20 billion, comprising $13.5 billion in urban areas, $0.8 billion in rural areas, and $5.7 billion of vacant non-resident Indian property brokerage.

 The government’s recent Model Tenancy Act, 2019 aims to simplify the complex dynamic of the tenant-landlord relationship. The first draft of the policy was released in October 2015 and aimed to promote rental housing through public-private partnerships.

 The Union Cabinet has recently approved the Model Tenancy Act under which separate rent authorities, courts and tribunals would be set up in districts to protect the interest of both the owner and the tenant. The objective is to institutionalise rental housing and to better establish the trust between the landlords and tenants. Moreover, co-living market is gearing up to meet the increasing needs of student housing.

In this scenario, the Model Tenancy Act will strengthen the confidence of NRI investors to invest in housing for a periodical return on investment. Among the broad stipulations include the Act is prospective in nature and will be applicable for residential, commercial and educational purposes and sets out broad parameters for compensation. It will not impact existing tenancy arrangements.

A tenancy agreement has to be in writing clearly defining the role and responsibilities of a landlord and a tenant within the prescribed period.

There is a cap on security deposit at two months’ rent for residential premises and six months’ rent for non-residential purposes.

A tenant is required to serve written notice before handing over the possession of the premises to the landlord. A significant inclusion is if a tenant fails to vacate, he will be liable to pay enhanced rent to the landlord.

Non-payment of rent for two consecutive months entails eviction from the premises. The government will establish Rent Authority, Rent Court and Rent Tribunal to deal with the cases.

I am planning to sell my land in India and wish to invest in overseas assets. What is the impact of capital gains and in countries where the DTAA is applicable how does it impact long term capital gains? Sharat Babu, Sharjah.

 Any immovable property held in India for a minimum period of 24 months is long-term capital asset and subject to 20 per cent taxation plus applicable surcharges.

If you are reinvesting in India, there are prescribed time limit within which you should invest. However, exemption is not available in the event of investment being made outside India.

It is not clear about your citizenship of the country but wherever India DTAA arrangement, it will be taxed in the country of your living and you can claim foreign tax credit for the taxes paid in India.

I have inherited agricultural land from the family and now living in Gulf with my son. Can I gift the land to my son and what are the formalities involved for gifting? Prasanna Shetty, Dubai.

Under the FEMA regulations, an NRI can inherit agricultural land and so you can own it provided you have completed the formalities prescribed under the state laws where the property is located. Assuming that your son is an NRI, while you can gift residential and commercial property to another NRI, you can gift agricultural land only to a resident Indian.

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