Should You Buy a Property Using Your PF Money?
Most of us are tempted to use our provident fund (PF) money to buy our homes. The need to possess a house seems more urgent. This is why the four crore subscribers of the Employees' Provident Fund Organisation (EPFO) got a reason to cheer when Labour Minister Bandaru Dattatreya in a written reply to the Rajya Sabha said that his government was planning to allow members of the retirement fund body to use 90 per cent of their PF balance for property purchases. For this purpose, the government will be amending EPF scheme and inserting a paragraph 68BD into the text.
"The government has taken a decision for modification in the Employees' Provident Funds (EPF) Scheme, 1952, to add a new paragraph 68 BD," Dattatreya said in his written reply.
So far, an EPF subscriber could avail of a loan 24 times his wages for property purchases. You wage includes your basic salary plus the dearness allowance. For instance, if you earn Rs 30,000 as wages, you could avail of Rs 7.20 lakh as a loan from the EPFO. Once the new paragraph is added, a member will also be able to use his money in the EPF account to pay his equated monthly installments (EMIs).
However, to avail of the benefits, a home buyer will have to fulfil certain conditions:
You should be a member of a housing society or a co-operative society which must have at least 10 members. Also, the property must be bought in the applicant's name or he should jointly own it with his spouse.
If you are tempted to make the most of the opportunity, here are some points for you to consider:
- The government will be inserting a paragraph on its new plans. This means that all the existing terms and conditions have to be fulfilled to avail of the loan. To begin with, you have to be an EPF member for five years to avail of a loan from the body.
- Under the current norms, for a salaried employee, his employer will be the one verifying your application and sending it to the local EFP office, the approval process may get much longer than you might have expected.
- Taking this route would mean your paperwork would increase.
- Experts are of the opinion that one should never use ones PF money unless is extremely necessary. Rather pledge other physical assets for your home purchase.
Also read
Buyers home loan EMI EPFO Rajya Sabha