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New rent control norm to push investment


New rent control norm to push investment

Last updated: October 5 2007
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  • New rent control norm to push investment

    In order to encourage investment in the housing sector, the government may bring in modified rent control norms favouring land-owners. The revised norms would attempt to address concerns of landlords regarding forceful occupation of the property by tenants. It would also ensure that landlords can revise rents as per the market situation after certain intervals.

    The urban development ministry has written to the governments of Karnataka, Maharashtra, AP, Kerala and Delhi asking them to standardise their archaic rent control laws as per the new model which would set a standard rent or floor rate for a particular area. These five states are the only ones with a Rent Control Act.

    The ministry is expected to implement its model rent control law in Delhi soon. “We would not fix any price bands for rent. It would be for states to decide as land is a state subject,” an urban development ministry official said. Although real estate is a state subject, the urban development ministry regulates property-related issues for New Delhi as formal statehood has not yet been granted to it.

    States have also been asked to disallow sub-letting. The Centre has warned that non-compliance would result in stoppage of fund flow under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).

    According to experts, rent control laws are responsible for degeneration of the quality of life in civic habitations. “When it becomes difficult to remove a tenant paying very low rent, landlords stop taking interest in maintaining the property. The tenants, too, don’t spend money on maintenance as they do not own it. The assets, therefore, deteriorate. We need to evolve a mature and long-term leasing market with best construction practices free from such controls,” DTZ India MD Ankur Srivastava said.

    “If a state like Maharashtra, which projects itself as the next Shanghai, intends to live up to the expectations of a modern city, it has to resurrect its archaic laws governing rent. The same is true for other states as well,” said an analyst.

    States, too, lose substantially in the form of low collection of taxes from rental income. A recent National Real Estate Development Council (Naredco) survey has estimated that at least Rs 2,400 crore annually is lost in Delhi alone due to low value of taxes on rented properties. This happens since the assessments are made on the rental values which are abnormally low, remaining unchanged at rates fixed half a century ago, thanks to the Rent Control Act.
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