New Delhi, May 19: The government plans to revive a four-year-old draft tenancy bill that will allow landlords to charge market rates from all tenants, with an opportunity to raise the rent periodically or get the tenant to leave without gruelling court battles.

Current tenancy laws, which vary from state to state, generally place a cap on house rent and make it difficult to evict tenants who refuse to pay revised rates even after long years of occupancy. ( See chart)

But even if the Centre gets the new law enacted, it will not be binding on the states, which might opt to continue with their old laws, seen as favouring tenants whose votes outnumber those of landlords.

However, the proposed law mirrors a wide practice in India's cities where tenants and landlords sign agreements at market rates and keep revising them - but at the cost of keeping the lease periods shorter than a year to bypass the current law.

The Rent Control Act, 1948, adopted by most states, applies only to leases of a year or longer.

The key feature of the proposed legislation is that it gives the landlord and the tenant wide freedom to strike agreements covering varied aspects of the lease without government interference, and for as long as they want.

It, therefore, mentions no figures or ceilings for rent or its revision, nor minimum or maximum lease periods - an aspect that even some of its supporters view as a gap.

It was the UPA government that had taken the first few steps towards drafting such a law in 2011 before abandoning the project. The current Union housing ministry is now working on a draft Model Tenancy Act, 2015, which is in the consultation stage.

It's not clear what the current government intends to do to encourage the states to adopt the proposed law if it's enacted. The original 2011 proposal said that only the states that adopted it would be eligible for funding under the Rajiv Awas Yojana, a housing scheme for slum dwellers.

Paramita Datta Dey, senior research officer with the National Institute of Urban Affairs, Delhi, endorsed the government move saying it was in keeping with the times.

"The government is trying to legalise something that has been a reality for decades in urban India, where tenants and owners get into short-term leases that are reviewed at the end of the tenure," she said.

Usually, the agreement is for 11 months, with an option for periodic renewal. Bypassing the Rent Control Act gives the landlord a window to seek a defaulting tenant's eviction.

Ministry sources said the government felt an urgent need to push the legislation as the current laws, with their low rents and lack of opportunity for eviction, discourage homeowners from letting their properties out.

"By allowing hassle-free rent hikes, the government is seeking to encourage property owners to rent out their properties and reduce the shortage of dwellings," an official said.

But Dey said that while the proposed law would ease the crisis of rented rooms in the cities, the government needed to issue "standard guidelines to determine the market rates".

"Rent cannot depend on the whims of the owner," she said.

"This proposal is the way forward," she added. "Even if the states don't adopt it now, they would eventually have to in order to deal with a major housing problem in the future, when there will be houses but it won't be worth anyone's while to rent them because short-term leases won't work."

Housing activists, however, said the significance of the 1948 law was that it provided cheap housing to the poor, especially in the metros.

"It is only because of the existing act that the poor can live in a city like Mumbai," said Mumbai-based housing activist Prasad Shetty.

He added that under the proposed law, the government had virtually given up any right to regulate rents in the country, "which is not acceptable".

A recent proposal by the Maharashtra housing department to amend the state's Rent Control Act has faced stiff opposition from the activists.

Under that plan, landlords can for the first three years charge half the market rent from tenants occupying houses larger than 862sqft and commercial establishments larger than 500sqft.

After the third year, the rent can rise. There's a ceiling for senior citizens: the yearly rent cannot be higher than 15 per cent of their annual income.

The proposed central bill prohibits anyone from letting out or renting any premises without a written tenancy agreement registered with the state-appointed rent authority.

To speed up the settlement of disputes, which often drag on for decades now, the proposed law provides for a reference to the rent authority to revise or fix rents.

However, if the landlord wants to evict a tenant for defaulting on rent, he must approach the Rent Court, a wing of the state high court.