Over the years, the Indian government has taken all possible measures to make sure every family has a roof over its head. Things have changed a lot from what it used to be- homes are offered at extremely affordable rates by the government as well as private builders; home loans have also become cheaper and convenient, one can apply for a home loan online and get instant approval as well as manage the loan account from the comfort of his home. All this is now possible because we envisioned it way before and made efforts toward it. Several progressive steps are taken by the government to make the housing scenario in India even better.
An important step was taken in 2016 when the government announced a housing scheme for the members of Employees’ Provident Fund Organization (EPFO). Under the scheme, EPFO subscribers are allowed to pledge their Provident Fund accumulations to buy a house or to build one. The monthly PF contributions can also be utilized towards the part or full repayment of their home loan or for making monthly EMI payments. This will make it easier for the middle-class buyers to purchase a home without compromising savings or cutting their monthly budget.
Let’s learn more about how the scheme works-
Home Loan against PF
There are over four crore EPF subscribers in India and it is a progressive move to assist them in buying a house. To explain in layman terms- the scheme allows you to use your PF account as collateral for your home loan. For the purpose of purchasing a house, you are allowed to withdraw funds from your PF account only after the completion of three years from the contribution. You can withdraw 90 percent of PF accumulation in your account or the cost of the real estate, whichever is lower. Earlier this amount was subject to the type of real estate you are buying. For plot purchase, the loan amount was equivalent to 24 months’ basic salary plus dearness allowance. And for buying a flat in an apartment project or for constructing your own house, the loan amount was 36 months’ basic salary and DA.
Withdrawals are possible from the PF account only if-
· The employee is a member of EPFO for at least three years
· The fund accumulation as well as the interest is at least Rs 20,000
It should also be noted that this amount can be withdrawn only once. This will be a triparty agreement involving the applicant, bank or financial institution and the EPFO, although the payment will be made by the EPFO directly to the lender bank. In case the allotment is cancelled, the amount has to be refunded into the PF account of the buyer within 15 days. In case the amount withdrawn exceeds the amount spent, the balance will be refunded to the PF account within 30 days of the deal. Home loan against PF can also be taken jointly but the co-applicant can be none other than the primary applicant’s spouse.
Payment of Home Loan EMIs through PF Account
Monthly instalments can also be made from your PF account towards an existing home loan taken in your name or in the name of your spouse. For this purpose, the lending institution will look at the amount contributed to the applicant’s PF account over the last three months.
Benefits of Home Loan against PF
The government is quite serious about making things more convenient for the people of India. A host of online services like linking Aadhaar to your PF account, UAN registrations etc. have been brought forward in a short span of time. Recently, the UAN withdrawal facility was also announced which would allow a member to withdraw his PF accumulation without employer’s signature. Home loan against PF is also very beneficial for the mid-segment homebuyers-
· No need to squander your savings or cut your monthly budget to get a home loan.
· You will get the age advantage; the older you are more will be the PF amount.
· After 5 years of contribution, your PF money is tax-free, so you will enjoy dual income tax benefits on home loan as well as the PF account from which you are financing it.
This is a part of the ‘Housing for All by 2022’ initiative taken by the government. It aims at assisting the working generation in buying the home of their dreams in any location they want unlike the housing schemes wherein the government builds affordable homes for them. Buyers will be free to choose their home from the real estate market without any restriction. They will not only be able to take a home loan on their PF account but also repay outstanding EMIs through the same. There is no big stress to repay the amount as it is, in fact, an advance.
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