Why RERA Shouldn't Have Missed Rental Law
The Real Estate (Regulation & Development) Act, 2016, is meant to strengthen the property market. While delays in establishing state regulatory bodies in various states have had an impact, there are other larger issues that seem to have been overlooked and are hence out of the authority’s jurisdiction. The Act has ignored one of the most important aspects of housing – rental market and the law that govern it. With buying and renting being equally important in a marketplace like that of India's, the real estate law should have taken this into account.
Why are rental laws necessary? Here are a few reasons:
Rent should be calculated on carpet area
Just like in buying, renting is also based on the size of the unit. The law mandates that all units should be sold in terms of its carpet area and not super area. In leasing, rent is often calculated in terms of the super built up area but it can justly be calculated on the carpet area only if there was a law in place.
Lack of uniform policy
There is a lack of uniformity when it comes to leasing in India, especially because various states have their own processes in place. The landlord enjoys the power of position and this often leads to the tenant being treating as an underling. This could lead to tenant eviction despite agreements. According to the Rent Control Act, eviction should only take place if the tenant defaults in his rent payment or sublets without permission or causes nuisance or if the landlord chooses to shift into the premises.
Discrimination on the basis of caste, creed, race, sexuality, marital status, food preferences and nationality is another flaw in India's rental market. This calls for a strong rental law.
Need for state rental law
Unlike the real estate law, which is gradually gaining ground and has made homebuyers aware of their rights, most tenants are not aware of the state-specific tenant protection law.
Lack of stringent policy on annual rent hike
Strong rental law is also a requirement because every landlord expects a 10 per cent hike in rent after a year or two. This causes problems for tenants, who has little option but to move elsewhere to find a more affordable place. This not only harms the tenant but also landlords, who will have to keep looking for new tenants.
However, there is a silver-lining too. Some measures announced recently will weed out certain ills.
No more sham rent receipts
Salaried employees using sham rent receipts to avail tax breaks is a practice not uncommon. All they needed was the PAN details of the landlord and a few receipts if the rent they were paying exceeded Rs 1 lakh. Not anymore. Now the assessing officer can also demand the proof – leave and licence agreement, and a letter to the housing co-operative society informing about the tenancy, electricity bill, water bill, etc.
Eyes on the landlord's income
If you are paying a rent of Rs 50,000 or above per month, your landlord is under the watchful eye of the authorities. To widen the scope of TDS, tenants are now supposed to withhold taxes at the rate of five per cent on rental payments and deposit it within a stipulated time period. Landlords will need to report their full rental income in their returns if they wish to claim TDS benefits.
According to the Central government, it is mandatory to register all rental agreements over 11 months and the restriction on security deposit amount to three month's rent. Those overstaying after the lease period will not be allowed to do so beyond six months. Tamil Nadu intends to put this into practice already and other states may soon follow suit.
Long-term lease and RERA
In a recent development, the Bombay High Court ruled that provisions of the Maharashtra real estate law will apply to long-term lease agreements. In August 2018, the ruling was passed while hearing the appeal filed by Lavasa Corporation, an upcoming township that is registered under the state RERA.
The court’s verdict proves that provision of the state law is applicable to units that are bought on an agreement of lease (in this case, it is a 999-year lease agreement). Lavasa Corporation had claimed that the RERA rules would not apply to lease since ‘promoter’, as defined by the RERA rules does not suggest a lessor. The court ruled otherwise.
Also Read: The Changing Face Of RERA: What Is New?