Funding home purchase with Employee Provident Fund corpus

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The government of India is drawing up a proposal to allow EPFO subscribers use up to 90% of their savings to buy homes.

The retirement fund body Employee Provident Fund Organizations maintains approximately four crore accounts of subscribers working in the formal sector. At present funds cannot be withdrawn by subscribers unless the account is closed or the subscriber has retired from service. Strict norms are in force regarding regulation and maintenance of these accounts.

The government now plans to introduce amendments to its rules so that subscribers can withdraw up to 90% for down payment and also relax norms to enable withdrawals for paying EMIs for home loans.

This will be quite beneficial especially for the middle-class home seekers, wishing to purchase their first home. However, this won’t be quite simple. The subscribers would have to create a co-operative housing society. This society would have to enroll at least ten members.

No numbers have come in yet as to the estimated amount that could come into the realty markets with this move. As on March 2016, the EPFO was managing a corpus of ₹8.5 lakh crore. Traditionally, EPFO funds are highly valued by subscribers as they are retirement funds meant for that specific purpose. It would be interesting to see how many members show interest in this scheme.

Nevertheless, the move shows government’s continued focus on mass and affordable housing. Such initiatives boost investor confidence in the market and would encourage participation among buyers. Opening an innovative option to fund house purchase also creates a positive perception in the minds of the buyers.


Resident Editor