Most of us are aware of the Employees Provident Fund scheme and its role in providing social security to industrial workers and other employees. There are at present about six lakh subscribers and the Fund has approximately Rs. 2,70,000 crore.
The amount has been invested in banks, the stock market and government securities. The subscribers can withdraw some portion of their contributions for purposes such as marriages and medical exigencies. The present proposal is for supporting the government’s ‘Housing for All by 2022’ scheme.
Salient features of the housing finance proposal are:
· EPFO will set apart Rs. 70,000 crore from its funds for housing finance which can help construct about 3.5 crore houses.
· All subscribers of EPF will be eligible for the housing loans.
· The houses will be mostly built by State-run housing construction firms such as National Building Construction Corporation, Housing and Urban Development Corporation, and Punjab and Haryana Urban Development Corporation.
· The programme will cover low and middle income categories whose monthly income is below Rs. 15,000.
· Only the first house will be extended the assistance.
· The cost of the houses to be built under the scheme will be laid down by the government.
· Main thrust will be for the affordable segment.
· Subsidy will be available from the Ministry of Housing and Urban Poverty Alleviation for the weaker sections whose EMI burden can be lessened.
· Interest rate will be lower than regular housing loan rates.
· The main target group will be the urban poor covered under the Pradhan Mantri Awas Yojana launched on June 25, 2015.
· 305 cities and towns will be covered initially.
Grey areasIt is not clear whether the loans will be released directly by the EPFO or refinanced by it to the primary financing institutions like banks, HDFC etc. The other important issue is who will ensure end-use and supervise the construction. If the future subscriptions are earmarked as security, how will the repayment be ensured? Another serious issue will be that when the subscriber to EPF loses his or her job, the subscriptions will stop and under such a possibility, the employer of the subscriber needs to be a surety to the loan.
Price stabilityThe prices of houses will increase when there is a general escalation in the price of raw materials and labour. How the prices of house construction can be controlled remains to be seen.
Already there is a perceived glut in the housing market and there is reluctance on the part of builders to reduce prices. Though there are reports that promoters and builders are allowing discounts, it may not be for long.
Quality of constructionThere is always a complaint that the public sector builders do not ensure quality of construction. Quality audit is, therefore, a must and the scheme should take care of this. With sufficient checks and balances, the scheme can serve the purpose of increased availability of finance for housing and EPFO will be another source to meet the targets under the ‘housing for all’ programme.
