Rent and Lease Laws of India Need Immediate Change!

I have been hearing and reading the opinions of many economists and legal experts regarding the need for having progressive property laws and rules in India that enable letting out of properties for residential and commercial activities beneficial and hassle free for both the property owners and the tenants. Unfortunately neither the union government of India nor the state governments in India seem to act in this regard.

Real estate business can flourish and would be beneficial to both the builders and the owners only when there are laws in place that facilitate all concerned in an equitable basis.

In countries like the USA, Australia, UK etc, getting a furnished accommodation on rent from property rental companies who not only build buildings but also furnish and maintain them properly for the purpose of letting them out is not difficult. They have the laws and rules that  permit such an economic activity. In India, such a thing has not yet happened.

Even after six decades of existence as a Sovereign Socialist Secular Democratic Republic, the democratically elected leaders and the officials of India who have been governing India under the authority provided by the written Constitution of India, could neither bring about socialism nor secularism in the manner that the Constitution stipulated.

Having failed in these and having observed failure of administered socialism and secularism in several other nations, the Indian leadership has evolved a system which does not honor socialism or secularism in the right sense as the Constitution envisaged.

Indian laws and the Indian jurisprudence is a legacy of the colonial era. Though India got independence from its colonial rulers, it has never achieved independence from the colonial era laws and legal systems partly because the Indian leaders finding the colonial systems too enchanting and beneficial for their own self satisfaction at the expense of the people at large. The incompetence of the elected legislators and the laziness of the permanent bureaucratic members responsible for drafting the laws for the elected legislators have also contributed to make the legal system of India to degrade and become too complicated preventing justifiable justice a distant dream to all. 

The Indian law practitioners got a gold mine of opportunities to enhance their practices and incomes because of the ever increasing complexities beyond the common understanding of the people of independent India. Contradictory and opposing judgments from the various levels of judiciary became a common thing in independent India as a result of all these. Ambiguities in the statutes provide enough scope for interpretation of the laws differently by different people!

Unfortunately, every halfhearted and incomplete approach to make corrections in the system causes and enhancement of ambiguities. As a result, the existing rule of law and justice in India is perhaps worse than what existed during the colonial days! Essentially what India has achieved by independence is a transfer of power from a group of colonial foreigners to a group of Indians with colonial mindset!

What the colonialists practiced was the control of land and property that belonged to the native Indians by adopting various rules and laws many of which had been for the purpose of governance as applicable more than a century ago. 

Unfortunately the same laws governing property, its use and control exist in India more or less in the same fashion as during the colonial days. Only cosmetic changes here and there were done by the state and the central governments of India after independence in this context. The absence of cohesiveness on a pan India basis is very obvious to any one who have tried to get to the details for any reasons.

Laws and rules regarding land ownership, sale, lease, use, distribution, partition, etc are not in accordance with the current requirements of the people of India. The Indian law makers seem too lazy and unconcerned to do the necessary work in this regard. As a result land reforms is an area of great disappointment for all in India. [You may read my earlier blog on this here!]

The rules regarding leasing and renting of immovable properties like residential houses, flats, apartments and commercial properties remain an  area of extreme concern which cause immense problems to the people, both the owners and the users. The present laws are too much biased in favor of one party than having a balanced approach. When such biased laws exist, no one can expect proper justice to the people. 

Let me explain this with a few examples. Suppose that you are an owner of one house at one location and you need to move to another location or city to live there for a few years in connection with your profession or job. What you immediately need is a residential accommodation on rent for a period of say 3-4 years till such time that you are in that location. You are now an owner of a property who wants to vacate your own home some where and move to another property owned by another person in some other location. Perhaps the other person too might be in a similar situation as you. 

But you would face much difficulty in getting a rented accommodation because of the present laws which are too impractical. The present laws are biased and made some decades ago when the situations were different from now. The laws also do not permit business men to build, maintain or let out properties following fair business ethics.

Indian real estate business for the time being is only concerned with building and selling of properties. The boom has created a big surplus of flats in all major cities and towns. In Mumbai alone, it is reported that there are over 130000 flats remain unsold.  Imagine the total money invested and the numbers lying unused all over India! At the same time the builders are not facilitated to give out these properties on rent, because the laws are not conducive for that. It is indeed a great opportunity lost for a country where millions are without shelter and housing!

The overall charges incurred by the sellers of properties are extremely high on account of high stamp duties, registration fees, lawyer fees, commissions to agents, etc. Just one transaction of a property would make it dearer by nearly 15 %. A property that has changed ownership a couple of times would naturally be with a much higher cost price than similar properties that did not encounter such ownership changes. Naturally, this situation artificially jacks up property prices in India causing much imbalances and unfairness in determining the fair price valuation of properties. This in turn causes a high degree of black economy trade in India.

Any progressive government who is determined to provide good governance for the betterment of the nation could never sit as a passive spectator to such things. Unfortunately passive governance has been the situation for several years!

I hope the Narendra Modi government would do some thing positive in this regard in the days to come. What I look forward in this context are:

1. New rent control laws as applicable to the whole country which is simple and beneficial to both the owners and the tenants. The law should also allow property companies not only to build and sell, but also to own, maintain and rent properties easily to clients on rentals that are fair and justifiable. It is reported that the government is already mulling on a  New law for regulating rental housing . But this law should also address issues like long term professional upkeep of apartment and commercial buildings on chargeable basis by estate management companies including facilities for existing owners societies to outsource such services to such companies.

2. New property transfer laws that enable owners to incur less costs while selling or transferring them there by reducing the possibility of artificial jack up of property costs. Governmental agencies should provide better and reliable property registration, record keeping and documentation facilities including creation of digital property identities and data. Government may stipulate different stamp duties for properties sold at different intervals of time. The national law should be the benchmark of guidelines for all state and local authority laws for all issues concerning development of properties, sale, lease, maintenance, taxation, fire safety, lift safety, water and electricity use, responsibilities of residents, etc.

3. Government may set up national institutes which train people in various aspects of land and property surveys, evaluation, record keeping, assessment, designs, documentation, etc. Degrees and diplomas from these institutes should be made mandatory for all appointments to offices responsible for activities pertaining to land and property assessment and management.

I would like the readers to respond with their views on these.