I have been working in a private company for the past 11 years. I wish to construct a house on a plot. I plan to withdraw money from my Employees’ Provident Fund (EPF) to fund the construction of the house. What are the rules regarding withdrawal from EPF or is there any other option?
—AB The provident fund (PF) is meant to be your retirement fund and hence should not be touched except in an emergency. In any case, PF withdrawals are available only after five years and for specified purposes like acquiring a dwelling site or a house or construction of a house.
Specific forms are required for making this withdrawal and the terms and conditions for the same are available at http:// www.epfindia.com/forms/F ORMS_Latest/Form31.PDF
Along with the application form for withdrawal from your EPF, you will need to submit the original title deed for verification, non-encumbrance certificate, estimated cost of construction and approved plan.
It is a better idea to take out a construction loan for constructing a dwelling unit on a piece of land already owned by you. You will have to submit an estimate of the total cost of construction, duly certified by an architect/civil engineer.
The construction loan will be released in parts, based on the progress of the construction. However, you will have to bring in your contribution in full before the lender disburses the loan. The lender may also insist on sending its own technical personnel to assess the progress of construction or may decide to rely on certificates/photographs submitted by you.
Some lenders are not comfortable funding selfconstructed properties and hence, your choices will be limited. You can approach the State Bank of India, Axis Bank, HDFC Ltd, ICICI Bank, etc, to apply for a construction loan.
As a thumb rule, if you are below 40 years, you should be eligible for around four times your net annual income as a loan of 20 years’ tenure. If the loan amount is below R30 lakh, the rate of interest will be in the range
of 10% to 10.25% per annum. I opted for a construction-linked plan (CLP) and received a demand from builder in June 2012. The project was not approved by any bank till November 2012. Adding to this, the builder-buyer agreement was signed among us in March 2013. Now the builder is charging interest on late payment since June 2012. I tried to settle with the builder but they are not agreeing to the same. Should I go ahead and send a legal notice to the builder? I also know some more residents who are going through the same problem. Will it help if together we all go to the builder or we file a case together?
—BS Clearly there is an issue with the project and the developer if no large bank is willing to fund the project. These kinds of issues arise when you do not do necessary due diligence before finalising the purchase. You should never buy in an under-construction project unless it has been preapproved by at least a couple of large lenders. Even then, please remember that pre-approval does not mean that there is no risk of delay.
It is always better to buy a ready-to-move flat even though it is more expensive because that avoids all construction delay risk.