While renting a residential property in India, tenants often encounter demands for excessively high upfront security deposits. This practice carries significant financial risk and leaves tenants vulnerable if the landlord fails to make repairs or faces foreclosure. To encourage more formal and transparent rental arrangements across India, the Union Cabinet approved the Model Tenancy Act in 2021. However, because it is a central model law, it does not automatically apply throughout India. The laws in effect in the state or union territory where the property is located will determine the actual legal situation as of 2026.
Objectives of the Model Tenancy Act
The Act aims to make the rental market more transparent, efficient, and fair for both landlords and tenants. Beyond capping security deposits, it offers several other meaningful protections. It mandates a written rental agreement for every tenancy, registered with a designated Rent Authority, and establishes a structured dispute resolution mechanism. Landlords cannot cut off essential services such as water and electricity to force a tenant out.
Security Deposit Regulations
Under the Model Tenancy Act, only two months' rent can be taken as an advance for residential property, and six months' rent for commercial property. This ensures tenants are not forced to commit huge sums at the start of their lease, a common practice in metropolitan cities like Mumbai and Bengaluru. The Act also prohibits arbitrary deductions from the security deposit. Landlords must return the deposit within one month of the tenant vacating the premises. Any deductions must be itemized and justified, covering only legitimate costs such as unpaid rent or documented property damage beyond normal wear and tear. This protects tenants from long waits and reduced refunds without clear explanation.
Fault Lines That Remain
Since housing is a state subject under the Indian Constitution, the Model Tenancy Act does not serve as a binding national law. States and union territories must enact their own legislation based on it. So far, adoption has been uneven. Some states have moved to align their rental laws with the model framework, while others continue to operate under older, outdated tenancy legislation. According to the Ministry of Housing and Urban Affairs, only four states—Andhra Pradesh, Tamil Nadu, Uttar Pradesh, and Assam—have aligned their tenancy acts with the Model Tenancy Act.
Practical Advice for Tenants
Regardless of which law applies, tenants should always insist on a written rental agreement that clearly states the deposit amount, conditions for deduction, and the timeline for its return. Photographing the property at move-in and move-out provides useful evidence in disputes. Being proactive can help tenants protect their rights and finances.
