The EPFO has recommended a scheme to help subscribers to buy houses where they will get an advance from their PF accumulation. Here’s how to go about it
Up until last year this was only a proposal that the Retirement EPFO scheme may allow subscribers to pledge PF as home loan EMI. Now the EPFO group developed on it further and has mooted a proposal through which members can form cooperative housing societies and use their entire provident fund savings towards buying land, constructing homes or paying housing loan instalments.
#Employees with at least three years’ subscription to the EPF scheme will be allowed to withdraw their savings for housing purposes, including repayment of loans from their monthly contributions
# Members can form cooperative housing societies to avail of this scheme
#Members of the cooperative society will have the freedom to choose their own house agency and the EPFO will also collaborate with other banks and lending institutions to help subscribers avail attractive and low rates of interest.
# It was previously suggested the benefits under the scheme of ministry of housing and urban poverty alleviation can also be extended to the beneficiaries of the scheme.
# The panel has suggested this scheme for low income formal workers who are EPFO subscribers and could not buy a house during their entire service period.
According to rules, the individual has to be have been a subscriber for at least five before applying for a loan. The property also needs to be in the name of the applicant or jointly owned with spouse only. A person could withdraw up to 36 times of basic monthly salary. The EPFO has to notify and approve housing agencies through which houses could be built or land could be brought
For government employees, dearness allowance is combined with the basic pay. To avail of a loan, the applicant needs to fill a declaration. A copy of the purchase agreement will be required as proof. Similar is the case when it comes to buying plots. However, a person can get only a loan worth 24 times the wages (basic plus DA).
In such cases where one used the provident fund account for paying off loans, the construction should have begun within six months of taking the loan and be completed within 12 months of the withdrawal. In case an individual intended to buy a ready house, the purchase also needs to be completed within six months. The withdrawals for purchase/construction can be made in one or more instalments.
This is an attractive source of money you never thought to touch, moreover, withdrawing from the PF account is less expensive than taking a home loan, however, financial advisors are of the view that dipping into these funds, should generally be avoided.
Or, if one does the EPF funds then they should try and increase their PF contribution by nominal amounts to put back the money so that their retirement fund is not affected. Some others have gone so far as to suggest that in case people can get their funds with gold then should go ahead with that rather than use a financial asset. Plus it does not offer you any tax benefits.
Although it's termed a loan against PF money, this is more like an advance, one that you need not pay back. A person, therefore, need not to pay it back. In case you could not use the entire money, you can refund the remaining amount through the employer within a month.