By Mr. Avneesh Sood, Director Eros Group
The Indian rental housing market is undergoing significant changes, influenced by rapid urbanization, shifting demographics, and evolving economic conditions. Despite its critical role in urban housing, rental housing continues to be governed by outdated laws that fail to address the realities of today’s market. The lack of uniformity in state-level rental regulations has led to increased disputes between landlords and tenants, a high percentage of vacant housing stock, and limited confidence among investors.
The introduction of the Model Tenancy Act was a step in the right direction, aiming to bring transparency and efficiency into the rental sector. However, its implementation remains inconsistent, with states yet to fully adopt its provisions. Rental laws in India need to go beyond basic tenant protections and rent control measures. There are deeper structural issues that must be addressed if the rental market is to provide stability, security, and economic viability for both tenants and landlords.
A well-regulated rental market can encourage more property owners to rent out their homes, ensuring greater housing supply, fair rental prices, and economic growth. However, the conversation on rental regulations often overlooks key areas that are crucial for long-term market stability.
The Psychological Cost of Rental Insecurity
The instability of rental housing is often viewed from a financial or policy standpoint, but little attention is given to its psychological impact. Tenants living in rental accommodations often experience anxiety due to the absence of clear legal protections. The uncertainty of frequent rent hikes, abrupt lease terminations, and lack of maintenance support from landlords can create a persistent sense of insecurity. This has a direct impact on tenants’ financial planning, productivity, and overall mental well-being.
For landlords, rental market instability is equally stressful. Weak legal enforcement means that landlords often struggle to reclaim their properties when tenants default on payments or refuse to vacate after lease expiration. Many property owners hesitate to enter the rental market due to concerns over lengthy legal disputes and difficulties in enforcing rental agreements. The fear of losing control over their assets prevents them from making long-term investments in rental housing, further reducing the supply of rental homes.
Stricter rental laws that mandate fair lease terms, predictable rent adjustments, and well-defined tenant rights can improve these concerns. A regulatory framework that ensures stability for both landlords and tenants will contribute to a healthier rental market, where housing supply increases and rental relationships become more transparent and mutually beneficial.
Rental Market Instability Fuels Informal Settlements
One of the unintended consequences of weak rental regulations is the proliferation of informal settlements. In the absence of structured tenant protections and transparent rental processes, low-income tenants, particularly migrant workers, find themselves excluded from the formal rental market. Many landlords prefer to avoid legal documentation and taxation by renting out properties through informal agreements, which lack any legal safeguards for tenants.
The growth of informal settlements is often a result of rental market exclusion. When formal rental housing remains inaccessible due to high costs, strict leasing requirements, and landlord bias, people turn to unregulated housing options. These settlements lack proper infrastructure, sanitation, and security, creating severe challenges for urban planning and governance. The inability to track these informal housing arrangements also makes it difficult for local authorities to implement effective housing policies.
Stricter rental laws can bring these informal arrangements into the formal sector by incentivizing landlords to follow standardized rental agreements. Clear regulations on security deposits, eviction procedures, and rental price revisions will make it easier for low-income tenants to access safe and legal housing. Additionally, formalizing rental agreements through digital platforms can help reduce instances of unregistered rental transactions, ensuring better oversight and policy planning.
Unregulated Digital Rental Marketplaces
The rise of short-term rental platforms such as Airbnb and Oyo Rooms has introduced a new challenge to the rental market. These platforms allow property owners to generate high rental yields by offering short-term stays instead of long-term rental agreements. While this has created lucrative opportunities for property owners, it has also significantly reduced the availability of affordable long-term rental housing in major cities.
Unlike traditional rental housing, short-term rentals operate outside most regulatory frameworks, leading to market distortions. In cities with high tourist footfalls and strong demand for temporary accommodations, property owners are increasingly shifting towards short-term leasing, which offers higher returns with fewer legal constraints. This trend has led to a shrinking pool of long-term rental homes, driving up rents and making housing less affordable for city residents.
Stricter rental laws must address the regulation of short-term rentals to ensure that they do not displace long-term tenants or artificially inflate rental prices. States should consider defining clear zoning laws, taxation policies, and licensing requirements for short-term rental properties. A well-balanced regulatory framework can allow digital rental platforms to coexist with traditional rental housing while ensuring that long-term tenants are not disadvantaged by market shifts.
Rental Data Blackouts Are Hurting India’s Housing Market Policies
India’s rental housing policies are often based on limited or outdated data, leading to ineffective policymaking. Unlike developed nations, India lacks a centralized system for tracking rental market trends, tenant demographics, and rental price fluctuations. The absence of accurate data on rental occupancy rates and lease agreements makes it difficult for governments to plan housing supply, investment incentives, and urban development strategies.
One of the primary reasons for this data blackout is the reluctance of landlords and tenants to formalize rental agreements. Many rental transactions are carried out informally, without legal documentation, as a way to avoid taxation and regulatory scrutiny. This lack of transparency prevents authorities from assessing the true demand-supply dynamics of the rental market, leading to misaligned housing policies.
To improve market stability, rental laws must mandate the digital registration of all rental agreements. A centralized rental housing database can provide policymakers with real-time insights into rental pricing trends, vacancy rates, and affordability issues. This data can be instrumental in designing targeted policies to improve rental housing availability, tax incentives for landlords, and tenant protections.
The Broken Legal Infrastructure in Rental Disputes
Legal disputes between landlords and tenants are a common challenge in the Indian rental market, yet the existing legal framework does not provide a quick or efficient resolution mechanism. Many rental disputes end up in civil courts, where cases can take years to resolve. This inefficiency discourages landlords from renting out properties and leaves tenants vulnerable to legal uncertainties.
While the Model Tenancy Act has introduced dedicated rent tribunals, their effectiveness remains limited due to a lack of proper enforcement and procedural clarity. Landlords face difficulties in evicting defaulting tenants, while tenants often struggle to hold landlords accountable for unfair practices. Without fast-track resolution mechanisms, the rental market remains fraught with disputes and delays.
A well-functioning rental dispute resolution system is essential for market stability. States must prioritize the establishment of independent rent courts with clear procedural timelines to ensure that disputes are resolved swiftly. Alternative dispute resolution mechanisms such as mediation centers can also be promoted to provide faster settlements without the need for lengthy litigation. Strengthening legal enforcement will improve market confidence and encourage more property owners to participate in the rental sector.
Conclusion
India’s rental housing market is at a crossroads. While the demand for rental homes continues to rise, regulatory challenges have hindered the sector’s growth and stability. Beyond the commonly discussed issues of affordability and tenant rights, there are several structural inefficiencies that must be addressed to create a well-functioning rental ecosystem.
Stricter rental laws that focus on stability, transparency, and dispute resolution will encourage more landlords to rent out their properties, improving housing supply and affordability. At the same time, well-defined tenant protections will ensure that rental housing remains a secure and viable option for millions of Indians.
States must take decisive action to implement comprehensive rental reforms that go beyond surface-level regulations. A well-regulated rental market is not just beneficial for tenants and landlords—it is crucial for India’s economic and urban development.
