Model Tenancy Law To Cause Further Dip Of Sales In Housing Market?

Model Tenancy Law/ Twitter
Model Tenancy Law/ Twitter

Buying an own home does not fit into millennials’ priority list anymore. What used to be top five things which people used to tick off after landing with a decent job, it has been jostled way down in the list with buying your dream car and taking international trips taking the place above it. And why not be the case when you can live in for just Rs. 15,000 per month than paying an EMI of Rs. 70,000 per month for a house with similar configuration?

Indians buyers’ preference is subtly shifting towards renting and the latest Model Tenancy Law is only going to bring a further spurt in renting. The Act, which proposes to regulate rental housing, will give more confidence to owners to put up their houses for rent, adding to the stock of 11 million vacant homes. The industry experts reportedly feel that this push in renting will bring a further dip in housing sales.

“If more (rental housing) supply comes, it will push down rent in the market. This, in turn, will put pressure on real estate projects because the yields will reduce further, hurting capital value,” Business Today quoted Pankaj Kapoor, founder and MD at Liases Foras, a real estate consultancy firm, as saying.

Since outgo on buying (principal plus interest on a loan) is touching the sky, it seems to be better off investing the savings in a fixed deposit and paying much lower rent. And if renting comes with the cushion of safety and surety of protection of tenant’s rights, more and more buyers are expected to continue to opt for it.

On the other hand, some experts also feel that Model Tenancy Law somewhere will give a push to NRIs buying houses in India. Harinder Singh Hora, MD, Reach Group, reportedly feels that many NRIs prefer buying residential properties but they have been avoiding renting out due to the fear that they might “face problems when they ask the tenants to vacate the property.”

Now that Model Tenancy Law is going to be in place, many lakhs of unsold units are expected to come in the rental market.

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