Employee’s Provident Fund (EPF) is a post – retirement benefits scheme that is available to all salaried employees in public as well as in the private sector. This fund is maintained and overseen by the Employees Provident Fund Organisation of India (EPFO) and any company with over 20 employees is required by law to register with the EPFO. It’s a savings platform that helps employees save a small fraction of their salary every month that can be used if a person is rendered unable to work or upon his/her retirement.
Apart from the obvious interest-free access to cash, here are more benefits to withdrawing to purchase a house:
The benefits of withdrawing from your EPF Account to purchase a house/ investing in the real estate sector are –
1)The return yielded by him/her is more if one invests in real estate rather than keeping that money stacked on a definite interest rate until withdrawal –
If a person invests the money that is present in his/her EPF account in the real estate market, he/she will definitely earn better returns than allowing the lump-sum amount to stay stagnant for a major portion of one’s life and allowing it to grow at a slower rate.
2) Minimization of the monthly instalments
One can withdraw the amount from the PF account to make the repayments of the home loan, thus making the wish of purchasing the dream house more of a possibility; also, it would release some of the current financial burdens that might be one’s shoulder. The amount is a significant one and hence it will definitely make people’s lives change in a significant way
3) Redeem loan balance to save on interest
If the housing loan’s interest rates are on the high side of the scale, one can pay it off to save on the additional interest costs and channel the funds towards other better causes.
4) Help spouse clear off home loan
One can help his/her spouse’s problem related to home loan repayment and in turn, it will also improve the cash flow for the family.
It is a well-known fact that buying his/her first home is rarely an easy task. Now the amendments in the EPF scheme would certainly allow more individuals to raise the funds required for the purchase of his/her dream homes. In that sense, it is a welcome move since it allows EPFO members access to their own funds in order to achieve a vital financial objective.
Pros of EPF Option
1) It allows him/her to buy or construct a home without or paying a lower amount of interest.
2) It is also greatly beneficial for those who need a small amount of monetary sum to fulfil the purpose of buying or constructing a home.
The Indian Government has of late made amendments in the scheme which will now allow the Employees’ Provident Fund Organisation (EPFO) subscribers to use their EPF accounts for paying equated monthly instalments (EMIs) of home loans. Under this new provision of the EPF scheme that will come into effect, EPFO subscribers would have to mandatorily form a cooperative society consisting of at least 10 members for withdrawing the required amount from their EPF accounts.
The subscribers of the Employees Provident Fund Organisation (EPFO) will be able to withdraw up to 90 percent of their amount in their PF account for the purchase of real estate. The option of EPF withdrawal for purchase/construction of a house is available only once in a lifetime for the EPFO subscribers.
From the restrictions that have been set by the government, we can see that the EPF’s withdrawal options serve a very specific purpose. It is solely about making homeownership dreams of the masses possible and more certainly affordable. Thus, if the purpose is single-mindedly about purchasing a house from the withdrawn amount, then withdrawing from his/her EPF account may just be the right move.