Protect interest of property owners in India - Change Model Tenancy Act, 2019.

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Indian Government is coming up with a new tenancy law to regulate renting of properties. The law is called the Model Tenancy Act, 2019 and is still in a draft stage. The new law aims at protecting the interest of the owner as well as the tenant. However, there is one provision in the law that is one-sided and goes against owner's interest. That is the limitation on Security deposit. The draft law put a limit or caps the security deposit charged by owners to a maximum of two months’ rent for residential property and one month’s rent for a commercial property.

This limitation is being introduced after complaints from tenants that owners ask exorbitant security deposit. However, this issue of high amount of security deposit is limited to a few Indian cities such as Bengaluru -  where a 10-month security deposit has become the norm.

Bringing down the security deposit to a maximum of one or two month's rent does not cover owners interest at all. It is totally insufficient to cover issues such as defaults in rent payment, significant damage to property by tenant or utilities unpaid by tenant and will result into a financial loss to owners. While we can empathize that a 10-months rent as security deposit can be too high for tenants; bringing it down to as low as 1 or 2 month's rent would adversely affect owner's interest. After managing properties for more that eight years, my experience is that 4 to 5 month's rent as security deposit should be the minimum requirement to cover owner's interest and is also a fair amount to tenants.

Please join me in telling the India Government to change the provision and make the security deposit as 4 to 5 month's rent instead of 1 to 2 month's rent proposed by the law.

P.S. Draft of the Act can be viewed on the Ministry of Housing and Urban Affairs website/ URL:  http://mohua.gov.in/upload/whatsnew/5d25fb70671ebdraft%20Model%20Tenancy%20Act,%202019.pdf