Provident Fund for Financing Home Purchase
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19 March 2019 - 14:00, by , in NRI, No comments

The government is pulling out all stops in making ‘Housing for All by 2022’ a success. As an initiative, the norms to withdraw Employees Provident Fund (EPF) have been relaxed further to enable members of the Employees’ Provident Fund Organisation (EPFO) to withdraw money from their EPF accounts to fund the purchase or construction of house or flat or to buy land. Also, they will be able to use their monthly PF contributions in part or full towards repayment of home loans. These will help 4 crore EPFO members to fulfil the dream of owning a house.

EPFO has allowed members i.e. the contributory employees of the provident fund (PF) scheme to use 90 percent of EPF accumulations to make down payments to buy houses and use their accounts for paying EMIs of home loans.To avail the benefits offered by the provident fund scheme, it is mandatory to be a subscribed member of the Employees Provident Fund Organisation (EPFO). This organisation is run by the Government of India, under the Ministry of Labour and Employment. All Indian companies with an active staff of more than 20 employees should mandatorily subscribe to this organisation to provide their employees with the benefits of a constant PF. Being a member of this committee enables one to be eligible to a loyalty benefit of INR 50,000 at the time of retirement, after a constant contribution of 20 years. On the contrary the loyalty benefit can also be availed during the unfortunate incident of a permanent disability, even if a period of 20 years of working has not been completed.

Under the new rules, the PF member is required to be a member of a registered housing society having at least 10 members to be eligible to withdraw the PF money to buy a real estate property. An employee who has been allotted a PF number is considered a PF member by the EPFO.

Monthly instalments can be made from the PF money against any outstanding loan in the name of the EPFO member or spouse, provided both are EPFO members.For payment of equated monthly instalment (EMI) through one’s EPF account, banks or lending institutions will consider the contributions made to an employee’s PF account over the past three months to calculate the EMI.

Withdrawals are possible only if all the three following conditions are met:

  • The employee is a member of EPFO for at least three years.
  • The accumulation in the member’s PF account (or together with the spouse), including the interest, has to be more than INR 20,000.
  • It can be withdrawn only once.

Payment will be made by the EPFO directly to the housing society or the government agency or the bank or the prime lending institution, and not to the member of EPFO.

If the member fails to get allotted a dwelling or a flat or in case of cancellation of the allotment, the amount has to be refunded to the EPFO within a period of 15 days.

If the amount withdrawn exceeds the actual money spent, the excess money should be refunded in lump sum within 30 days of finalisation of purchase or construction of house or flat.

The rules, however, do not encourage secondary market or resale transactions of real estate properties. EPFO will be making the payments directly to the co-operative society, state government, central government, or any housing agency under any housing scheme, or any promoter or builder, in one or more instalments, as the case maybe.


See Also: Real Estate Investment Trusts

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