Buying a home with one's own money is still a dream for many. There are various sources from where one can fund the purchase a dream house – from borrowing from friends or family members, to taking a home loan. While banks will give 80% of the property value, the remaining 20% of the amount has to be arranged by the buyer. Arranging this money can be a tough ask for many. So, is there any other way to finance the property purchase? Very few people know that the amount saved in provident fund can be used to get your home dreams fulfilled. This article offers tips to use provident fund to finance a property purchase.
PF for buying a plot
An employee is eligible to withdraw provident funds for the purchase of a plot only if one has completed at least five years of contribution to his provident fund account. A person can withdraw this amount individually or jointly in the name of his/her spouse.
The withdrawal amount limit would depend on the purpose for which you are withdrawing the money. For purchasing a plot, the withdrawal amount is restricted to 24 months’ basic salary and dearness allowance (DA). This amount, however, shall in no circumstances exceed the value of the plot.
PF for buying a home or for construction of a home
The primary condition for withdrawal from EPF Account for the purchase of construction of a new house is that the employee must have completed at least 5 years of contribution to his provident fund. However, here an employee is eligible to withdraw 36 months’ basic salary and dearness allowance (DA). The amount can be withdrawn by either your wife or by yourself or jointly.
The construction of a property should begin within 6 months of the withdrawal of the amount and should be completed within 12 months of the last instalment of withdrawal.
In the second case, if you are looking to withdraw the amount from your EPF account for the purchase of ready-to-move-in house, then the deal for the purchase of house should be sealed within 6 months of the withdrawal of the amount. Also, the house can be purchased only by you, your spouse, or jointly by both.
Furthermore, the provident fund withdrawals can be made in installments as per the demands of the situation and need of the individual.
PF withdrawal facility housing society member
Apart from withdrawing the amount by the PF account holder individually, he or she can also derive money from the EPF account if he or she is an existing member of a registered housing society or a cooperative society. This withdrawal can be made by an individual to buy a plot for constructing a residential house from the government or any approved government agency.
An individual can avail this facility only if the housing society has at least ten members. The maximum amount of withdrawal is restricted to 90% of EPF Balance (employer's as well as employee's contributions, including interest) or the cost of the construction of property, whichever is less to provide for the purchase or construction of house/flat or for buying land.
A person has to make a continuous contribution to the EPF account for three years and he or she is eligible to withdraw this amount only once in a lifetime.
Under the EPF scheme, you are eligible to pay monthly installments for any outstanding loan by paying via your EPF account. However, this is a subject matter of sufficient/insufficient balance in your account.
PF withdrawal for renovation/improvement of self or spouse-owned property
A person is also entitled to withdraw money from its provident fund account, for making additions or improvements to a residential house that is owned by his/her spouse or jointly. This withdrawal can be claimed only after five years from completion of the house. It is not necessary that the property for which you want to carry out the improvements should be the same, on which you had availed the withdrawal facility. The withdrawal amount, for improvement or addition, is restricted to 12 months’ basic salary and DA. Also, the cost of such improvement will be considered.