Low-cost housing for EPF members may face hurdles, here is why

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Published: May 11, 2016 1:32:24 PM

The government's proposal to provide low-cost housing to subscribers of the EPFO could may face birth pangs, with questions being raised over its practicality.

Low cost housing for EPF membersLow cost housing for EPF members: Members of the Central Board of Trustees of EPFO,who have deliberated the plan in two earlier meeting, told FeMoney that though the purpose is laudable, doubts have been raised over its implementation. (Photo: Reuters)

The government’s proposal to provide low-cost housing to subscribers of the Employees’ Provident Fund Organisation (EPFO) could may face birth pangs, with questions being raised over its practicality given the low EPF contributions in general and paltry accumulations.

Members of the Central Board of Trustees of EPFO,who have deliberated the plan in two earlier meeting, told FeMoney that though the purpose is laudable, doubts have been raised over its implementation.

“The CBT has discussed the issue over two meetings. The idea of providing low-cost housing is good but the question is whether it will be practical. Most EPFO members are in the low earning category. Their contribition may not be adequate to facilitate equated monthly instalment for purchase of house,” A K Padmanabhan, President, Centre for Indian Trade Unions (CITU) and member, CBT, said.

He also mentioned that there is no surety of continuation of service and hence committing EMIs from EPF deductions for the long term may not be feasible. He also pointed out that the law provides a ceiling of Rs 15,000 for compulsorily maintaining an EPF account. At the higher end of Rs 15,000, a montly contribution of 12 per cent has to be paid by the employer towards EPF which works out to Rs 1,800 per month, with a matching contribution from the employee.

Labour Minister Bandaru Dattatreya had informed the Lok Sabha on Monday that the Government is exploring possibility for providing suitable low-cost housing scheme for subscribers of EPF.

According to reports, an EPFO committee that considered the proposal favoured facilitating an advance to the subscriber to purchase a house with an agreement to pledge future EPF contributions as EMI.

DL Sacheva, general secretary, All India Trade Union Congress, AITUC, who too is a CBT member, is also sceptical. He mentioned that the idea is being replicated from Singapore where the system is totally different. “It will not be easy to replicate what is being offered to provident fund members in Singapore. The EPF contributions and the corpus in India is generally low and may not be enough to finance purchase of a house,” Sachdeva said.

Padmanabhan felt all financing aspects should be taken into consideration before finalising the proposal. “We have to do an objective study of the situation and assess how much a low-cost house would actually cost and at what level of EPF contribution would it be feasible to finance the home purchase. Also, what happens in the case of job loss has to be considered,” he said.

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