HOUSING LOAN SCHEME
With the objective of offering an added benefit to the EPF members, as per the section 22 of the EPF Act, No. 42 of 1988, EPF Housing Loan scheme has been implemented as a pre-retirement benefit to the employees.
The Loan will be granted for any one of the following purposes:
- Construction or Completion of a house.
- Purchase of a house or Building site.
- Improvements or additions to an existing house
- Redemption of a debt obtained from a recognized lending institution in connection with one or more of the above purposes
- Active members who are currently contributing to the EPF fund are eligible for a guarantee for 75% of the balance outstanding to their credit in one or more of their EPF accounts.
- Inactive members who have not contributed to the EPF fund throughout the preceding year are eligible for a guarantee for 50% of the balance outstanding to their credit in one or more of their EPF accounts.
- Members who have taken 30% refund benefit are eligible for a guarantee for 50% of the remaining balance of their EPF account/s.
- In the case of married members and members having children who are contributors to the EPF fund, a guarantee can be obtained by combining the balance of both accounts. In such cases, the amount available depends on the applicant’s own credit status.
- A member should obtain two Housing Loan Application Forms from the nearest Labour Office or download from the website and send the duly filled Forms back to the same Office.
- The Labour Department will check the Forms and forward From “No.02”, based on the information provided in the application, to the EPF Department.
- If the application is accepted, a certificate will be issued indicating the amount approved And this will be sent back to the relevant Labour Office.
- Subsequently, the loan can be obtained by producing the certificate to the preferred lending institute.
Repayment of the loan will depend on the terms and conditions agreed upon with the lending institute. The loan is considered as settled, only after the payment of last installment. After the payment is completed, the loan settlement form (Form 14) should be obtained from the relevant Labour office or downloaded from the website. This Form should be sent to the Labour Department after it is duly certified by the lending institute. The Labour Department will then forward it to the EPF department for record updation.
If the member fails to pay the due installments, the lending institution will send default application through their head office annually. The amount will be debited from the EPF balance of the member concerned and will be paid to the lending institution.
Members are not encouraged to default payment for the housing loan, as interest is deducted at the end of the year, thus cumulating the amount and the rate for default is much higher than the rate for the housing loan. (This default rate depends on the lending institution). This has led to the erosion of the member’s balance available for retirement life.
Refund of Thirty Percent (30%) of the EPF Benefit
With the objective of offering an added benefit to the EPF members, the EPF Act, No. 15 of 1958 was amended in 2012 and as per the EPF (amendment) Act No. 02 of 2012 and the subsequent procedures passed by the parliament in May, 2015, a new pre-retirement benefit has been implemented in July 2015 to release (as a withdrawal) 30% of EPF balance for the following purposes.
What are the Purposes?
- Construction of a house on a land belonging to a member.
- Purchase of a land for the construction of a house.
- Purchase of a house.
- Redemption of a mortgage on housing property; or
- Settlement of an outstanding balance of the housing loan received from the approved bank.
- Medical treatment (A member of the EPF fund, his or his spouse and his children shall be entitled to the below mentioned medical treatment)
- Heart surgery.
- By-pass surgery.
- Treatment for cancer including surgery.
- Kidney transplant or surgery.
- Cesarean operation; or
- Hospitalization for not less than fourteen days on the account of an accident.
As per the EPF (Amendment) Act No. 02 of 2012, every member of the EPF fund who:
- has made contributions to the Fund for a period of not less than ten years;
- is presently employed; and
- possesses not less than Three Hundred Thousand Rupees to his/ her credit in the individual account, is able to obtain the above benefit for the following purposes:
- Medical Treatment.
The maximum amount of benefit receivable by a member is capped at Rupees Two Million.
Applications with the required documents for refunding the 30% of EPF balances under the above purposes are accepted by the Labour Department (LD) and administration with respect to the above scheme is done by the LD. After evaluating the validity of the submitted documents by the members, and if such documents are complying with the requirements, mentioned in the Act, Payment Orders (Determination Letters) of Commissioner of Labour will be sent to the EPF Department of Central Bank for releasing the money to the respective beneficiaries.
However, if a member has obtained a Housing Loan under the EPF housing loan scheme and if it was not fully settled, then the defaulted loan amount is directly remitted to the relevant bank for the settlement of the housing loan. The balance amount of 30% of the EPF balance will be released to the member as per the instructions given by the Commissioner of Labour.