On 2 June, the Union cabinet approved the MTA, which ensures a level-playing field for landlords and tenants. The new Act replaces the Rent Control Act, 1958, and aims at bringing about a balance of interests between tenants and landlords. “On the one hand, India has a large vacant housing stock of over 110 lakh units and on the other, it has a huge housing shortage. One of the key reasons behind this paradox is the low rental yield in the country, which is one of the lowest across global markets. While here rental yields stand at 2-3%, the same in some key markets can go as high as 7-8%. Moreover, with the high taxation of 30% in India, the net benefit from rental income is low, especially when compared with housing finance costs of around 7-8%,” said Mahi Agarwal, sector head and assistant vice-president at ICRA. He also added,“While capital appreciation used to cover this gap earlier, it has been muted over the last few years, making the gap between rental yields and interest costs more detrimental. Thus, in order for the rental market to develop, returns would need to increase. With MTA in place, housing stock can be used more efficiently, which would, in turn, support greater formalisation and institutionalization of the sector over the medium-to-long term. The consequent development of new business models would aid improvement in return metrics. Effective and broad-based implementation of the Act, with continued government support and initiatives aimed at reforming the rental market would be key”. (Source : Mint News)