Having own house is the dream of millions but due to various constraints, many are forced to stay in rented houses. Generally rents in major cities are quite high but people somehow get used to it and pay rent to the landlord. People are often troubled by landlords who increase rents everyyear.
However the rents may increase astronomically if the Indian Rent Control act which has been revised recently come into existence. The earlier act dates back to 1948 and it was not revised till 2015 last October. Government introduced draft Model Tenancy Act in 2015 and it will soon becomes an act when the individual state governments adopt the revised terms.
Though rents are high in major cities, they are in disarray for quite sometime. In cities like Mumbai, where property prices touched sky high,some landlords always had problem increasing rents or evacuating tenants who have been staying for longtime.
Landlords blame archaic laws that are preventing them from getting maximum rent on their property and tenants feel rents are expensive in prominent locations. As the draft becomes new act sooner than later,landlords and tenants must be aware of the following points.
Urban residents according to survey pay 25-30% of their income towards rent but tax deduction on house rent allowance is subject to a ceiling of 25% of annual income or Rs 5,000 per month, or whichever is less.
Owners too can claim tax rebate after a standard deduction of 30% from the net annual value (minus municipal taxes) and interest paid to banks on home loan, if any.1948 Rental act is applicable only for 12 months and it puts cap on rent which differs from state to stage. While in Tamil Nadu,rent cannot exceed 10% od the stardard rate, in United Andhra Pradsh it is just at 6%. Many donot follow and rents always incerase by 10-15% per annum. Landlord too cannot increase rent unless specified in the agreement over a year.
There are two types of rent agreements-Lease and Leave and License. The draft Model Tenancy Act 2015 allow landlord to charge rent according to market rate and this cannot be more than 10% in the agreement. The Act prevents landlords from taking beyond 3 months rent as security deposit. In metros, the norm is 6 months to 1 year and a house with Rs 15,000 rent means an outgo of a princely Rs 75,000-Rs 1,80,000.
Rent cannot be revised between the agreement and rent can be capped in consultation with the state government. Security deposit will be capped at three times the monthly rent. Plus point is tenants can claim rent deduction if quality of services fall.
