Provident Fund to Finance Real Estate Investment
The Provident Fund is the sole cash fund that remains with you at the end of your life. Drawing the fund to finance your current investment needs can end up bringing more damages than the anticipated good things. Here in this article, we will get through some practical reasons why you should avoid withdrawing your retirement fund for your real estate investment.
The approved norm to draw the funds from the PF account has always been there in place to allow the investors to finance their real estate investment. But the provision to use the PF funds for the real estate investment has some restrictions.
The Prudent fund is your retirement cushion:
Withdrawal of your prudent fund should only be done in dire conditions. Any sorts of withdrawal from your PF account could be harmful to your future fund. You should look for other possible options such as a home loan or your other savings fund.
Don’t compromise with the compounding power of your prudent fund:
If you withdraw your prudent fund for the real estate investment in India, then you also withdraw the compounding power of the cash fund. With more 8.5% rate of interest on the PF, it gets almost doubled in just eight years. If you calculate the overall cost of choosing prudent funds for your current expenditure, you will come know that the option is never a wise move.
Choose a more productive investment avenue:
If you are withdrawing a fund, which is already earning a substantial return, for an investment avenue that appears out to remain not-too-much-productive in the coming 4-5 years, then it is never a financially right decision. So, as per the current situation in real estate industry in India, your investment might not bring you returns as much as you are expecting. In such conditions, you would better consider other options than withdrawing your prudent fund.
So these are some genuine reasons that every home buyer considers before they plan to use their PF for the real estate investment. Some of the experts believe the people should go for it only when if it is their first house. Or, they are not buying property for the investment purpose only. Instead, they suggest pledging gold to finance their investment.
On the contrary, the reasons mentioned above may not work for those who are aged at below 35. It makes quite a sense if you have enough age to infuse your PF account with the funds again. You can go for the option easily if you can repay the fund—it ensures that you can have a substantial amount of fund at the age of retirement.