The information in this article might be useful if you own real estate in India that is rented and the tenant doesn't leave the house after the contract ends.
A majority of NRIs want to buy real estate in their home country for two reasons: one, if they move back there, they'll have their own home there, and two, it's their home country so they think it's the most appropriate place to invest. NRIs have long been interested in Indian real estate.
There are some headaches associated with owning real estate property in India, along with its benefits. It can't be left empty, so you'll have to rent it. If the tenant refuses to leave, what will you do?
Overseas Indians, however, had trouble renting properties until last year. NRIs, overseas investors, and outstation resid0ents are worried that the tenant may not vacate the property after the lease period ends, which is one of the main pain points in leasing out properties.
By approving the Model Tenancy Act (MTA) last year, the Indian government has lessened your pain.
The new Model Tenancy Act (MTA) replaced the Rent Control Act (RCA) of 1948. As a result, the tenant is now subject to a penalty in the event he or she fails to vacate the premise post lease termination. Here is how these norms will benefit NRIs financially.
The Model Tenancy Act 2020:
In order to minimize petty rental disputes, the Model Tenancy Act mandates that tenants and landlords enter into a written agreement for all new tenancies, which means that rent and duration of tenancy will be fixed by mutual consent between the two parties.
In accordance with the Act, the tenant is liable to pay the landlord twice the monthly rent for the first two months if he or she does not vacate the premises let out on rent in accordance with the lease agreement. The landlord may continue to occupy the premises until the latter is paid four times the monthly rent.
Both tenants and landlords are protected by the Act. As part of the Act, security deposits will be eliminated, while rental activity will be boosted. Additionally, it covers eviction rules, the availability of essential supplies, structural repairs, and construction.
Furthermore, the Model Tenancy Act 2020 addresses how renters can legitimately increase rent without compromising tenants' rights.
Reasons why we need the Model Tenancy Act 2020:
The MTA tries to address how a renter can legitimately increase the rent without compromising the rights of a tenant. Furthermore, the law not only minimises the possibility of disputes by clearly defining landlords' and tenants' responsibilities and obligations but also puts in place a mechanism to provide speedy resolution to disputes.
1. Renters are permitted to increase rent legitimately without compromising tenants' rights under the MTA.
2. Through clear definitions of landlords' and tenants' responsibilities and obligations, the law reduces the possibility of disputes and provides a mechanism for the speedy resolution of such disputes.
3. Residential property returns have remained low for a very long time. While house prices have skyrocketed, rental income is still only between 1.5 and 3 percent of capital values. Therefore, the MTA improved the rental revenue prospects of NRIs.
Difference between old RCA 1948 and MTA 2020
India's rental and leasing operations are closely regulated by the Rent Control Act, which is implemented in various forms in each state. In general, the purpose of the Rent Control Acts is to protect tenants from unfair eviction and to settle disputes between landlords and tenants.
It is unfortunate that most of the old laws have not been amended for over two decades, which ensures that rent ceilings remain at levels prevalent in the 1990s.
As a result, many property owners, such as NRIs, have stopped renting out their properties and their enthusiasm for buying second or third homes has been reduced by low capital returns."
How NRIs can benefit from the Model Tenancy Act 2020
In recent years, NRIs have expressed a strong interest in investing in Indian real estate. NRIs, however, faced a significant amount of uncertainty as to whether tenants would comply with rental agreements.
Prior to the law coming into effect, family members and close friends usually arrange for the tenant and collect the rent in India or they keep them vacant due to the uncertainty surrounding the tenant leaving after the lease is up. As a result, this law was enacted.
The Model Tenancy Act 2020 is investor-friendly and has traditionally encouraged foreign investment in Indian real estate.
By implementing the Model Tenancy Act, the country will formalize the renting and leasing of real estate properties, since the majority of NRI investment has been in commercial properties due to their immense size, size, and higher return on investment as compared to residential properties.
As a result of the Act, overseas investors are more confident in leasing out their properties and unlocking monthly rental gains. In addition, institutional investment in residential real estate has been boosted by clarified leasing laws.
Conclusion
Due to the more transparent regulatory framework for rental homes, NRIs looking to invest in Indian real estate for sustained rental income will benefit greatly. Additionally, the positive outlook will enable NRIs to easily earn money from their vacant residential properties by renting them out.