PF Withdrawal For Property Investment; Is It A Wise Choice?

Every month, every salaried person contributes a set amount to his or her EPF account. Without a question, EPF assists us in obtaining post-retirement income; however, the EPF account can also be used to meet any other cash needs. One can use the provident fund amount. An employee's PF account is funded with 12% of his or her basic salary plus basic allowance. The employer also makes a reciprocal contribution, with 8.33% going to the Employee Pension Scheme (EPS) and the rest to the PF account. To begin the process of withdrawing funds for the purchase, construction, or renovation of a home, fill out Form 31. You must have a minimum EPF balance of Rs 20,000 in your account. In the case of joint ownership, your and your spouse's EPF balances must be greater than Rs 20,000.

How much will EPFO pay?

Reason for PF Withdrawal	Limit Withdrawal
Buying a plot	Basic salary of 24 months and DA
Constructing a house	Basic salary of 36 months and DA
Buying a house	Basic salary of 36 months and DA
Home improvement/renovation	Basic salary of 12 months and DA
Repayment of housing loan	Basic salary of 36 months and DA

PF withdrawal for construction of a house

Individuals who have been a member of the EPFO for five years are entitled to take a portion of their PPF money to build their houses. The house must be declared in the name of the member or his or her spouse before the money can be withdrawn. Your provident fund deposit will be used to fund the building of your home on a previously owned estate. This bid, however, is only valid if your construction starts within the first six months of withdrawal and is completed within a year.
The lowest of their basic salary and dearness allowances for 24 months, or the actual cost towards the purchase of a plot and building, or the total of employer and employee contribution along with the interest, will be taken into account to calculate the amount for those who want to withdraw money from the PPF to build a home.

PF withdrawal for repaying Home Loan

You can also withdraw a limit of three years of your annual compensation balance from your provident fund deposit to pay off an unpaid home loan in your or your spouse's name. To withdraw the money, however, you must have completed at least three years of service. If the house is registered in his or her name or kept jointly, the PF member is allowed to withdraw up to 90% of the corpus to repay the unpaid home loan. 
The provident fund scheme allows you to withdraw funds for any of the above purposes, including repaying the outstanding balance of a home loan taken out by you or your spouse. The total sum cannot be more than 36 months' basic salary plus DA.

PF withdrawal for renovating and reconstructing a house

Employees will take money out of their EPF accounts to renovate and rebuild their homes. Furthermore, even if you want to renovate a pre-owned home, you can take money out of your provident fund account. However, the maximum sum that can be taken out for a property upgrade cannot exceed one year's income, and you can only take another withdrawal after ten years.
Even if you haven't taken advantage of the withdrawal facility for the purchase or construction of your home, you can use it to upgrade it. The sum you will withdraw for improvements or additions to your current home is limited to 12 months' minimum salary and DA, according to the expense of the improvements.

Should you withdraw PF money to purchase a home?

Although it is possible to withdraw PF funds to purchase a home, experts believe that this is not a wise decision. This fund's main aim is to provide some financial security during your retirement years, and it's best if it's kept that way. Compounding works in your favor over the working years if you keep adding to this corpus and do not withdraw money in the interim. That means you'll have a sizable sum in your hands when you retire if you don't use it for anything else. Begin saving money for a down payment over three to five years. If home prices rise or your investments do not perform as intended, you may want to postpone your home purchase for a year or two. Once you've made the down payment, apply for a home loan, but better not to touch your EPF funds unless you don't have any other option.