Rental Housing and the Model Tenancy Act

Why India's rental housing market is small and informal, how old rent control laws discouraged renting, and how the 2021 Model Tenancy Act aims to fix it.

Many Indians, especially migrants and young workers, need rental housing. Yet India’s formal rental market is small and often informal.

Why rental housing is limited

Old rent control laws, such as in Mumbai, froze rents at very low levels for decades, making landlords reluctant to rent or maintain properties.
Fear of tenants not leaving: slow courts make evicting tenants difficult.
Informal agreements without proper documentation.
Vacant homes: millions of homes stay empty because owners fear renting.

The 2011 Census counted over 1 crore vacant homes in urban India.

The Model Tenancy Act, 2021

The central government released the Model Tenancy Act in 2021 for states to adopt. It proposed:

Written agreements registered with a rent authority.
Security deposits capped at two months’ rent for residential property.
Rent courts and tribunals for quick dispute resolution.
Clear rules for rent increases, repairs and eviction.
Protection for both landlords and tenants.

Adoption depends on states, and progress has been gradual.

Why it matters

More rental housing helps migrants and young workers.
Labour mobility improves when people can easily rent near jobs.
Vacant homes could be used productively.

Rental yields

Rental yields in Indian cities are often low, around 2 to 4 percent of property value, which makes buying to rent less attractive financially.

The empty flat

A family owns a second flat but keeps it empty, fearing a tenant might not leave and court cases could drag on. With clear agreements and a fast rent court under a new law, they decide to rent it out.

Thinking rent control helps tenants in the long run

Strict rent control can reduce the supply of rental homes and discourage maintenance.

Key takeaways

India's rental market is small and often informal.
Old rent control and slow courts discouraged landlords.
The 2021 Model Tenancy Act proposed rent authorities and capped deposits.
More rental housing aids migrants and labour mobility.