How to apply for a home loan against PPF account?

Buying a house involves a substantial sum of money and people consider different ways to finance their property purchase, such as home loans and loans against property. Many people also go for home loans against savings schemes. The Indian government provides various savings schemes with the aim to ensure financial security for the citizens by encouraging the habit of savings. One of the popular investment schemes offered by the government is the Public Provident Fund (PPF). It is a long-saving scheme with a lock-in period of 15 years, and the returns are tax-exempt. An individual who is a PPF account holder can apply for a home loan by fulfilling certain conditions. Given the rising property rates in India and other significant costs involved in purchasing a property, including GST, stamp duty and registration charges, etc., availing home loan against PPF comes with a lot of advantages.

What is the Public Provident Fund (PPF) and its benefits?

Savings schemes are designed to enable individuals to park a specified sum of money in their accounts and increase their wealth through high interest rates. Moreover, these schemes also come with tax benefits, maximising the savings. The Public Provident Fund or PPF is a fixed-income savings scheme and is considered one of the safest investment options. The scheme allows individuals to open a single account and start investing with a minimum sum of Rs 500. Owing to this feature, the scheme is a favourable choice for savings among different income groups in India.

Who can open a PPF account?

The PPF scheme is open to all Indian citizens, except for non-resident Indians (NRIs), Hindu Undivided Families (HUFs), and trusts. An individual can open a PPF account for self or on behalf of a minor through a legal guardian. Only one PPF account can be opened by an individual and multiple accounts are not allowed.

How much amount can you invest in PPF?

The minimum limit for investing in a PPF scheme is Rs 500 in a financial year, while the maximum limit is Rs 1,50,000. Moreover, the contributions in a PPF account can be done through multiple deposits throughout a year or as a lump sum deposit in one go.

What is the lock-in period?

To promote long-term investments and provide maximum benefits for individuals, the government has kept a 15-year lock-in period for the PPF scheme. However, partial withdrawals are allowed after five full financial years have been completed from the date of opening the PPF account.

Extension of the maturity period: After the PPF account matures after a 15-year period, the account can be extended for any number for a block of five years with further deposits and without interest loss. Partial withdrawals and complete closure before the maturity period under specific circumstances are allowed.

Interest rates: The PPF scheme offers an attractive interest rate of 7.1% per annum, which is higher than those offered by most schemes. The government has kept the PPF interest rates unchanged at 7.1% for the April-June 2025 quarter.

Tax benefits: The contributions made in a PPF account enable the account holder to avail of tax exemptions under Section 80 C of the Income Tax Act, 1961, up to a maximum of Rs 1.5 lakh. This benefit will be available if they have opted for the old tax regime. Further, the maturity amount and interest earned are tax-free.

Home loan against PPF account

One of the key benefits of the PPF scheme is the option to avail of a loan against the amount saved in the PPF account. Purchasing a property is quite expensive due to the significant costs involved. Moreover, buyers often face the reality of high home loan interest rates, which puts additional pressure on their finances. Hence, the option to avail a loan against PPF savings is an advantage, especially when going through a financial crunch.

When can you avail of a home loan against PPF?

If you are a PPF account holder, you are eligible to avail of the home loan facility after completing three financial years. However, it is to be noted that this facility will be available only till the end of the sixth financial year.

How does a PPF home loan work?

A homebuyer can opt for a PPF home loan if they have a PPF account and fulfil the relevant criteria of completing three financial years. The government has set certain rules for the maximum amount an individual can avail for a home loan through a PPF account. The account holder cannot avail of a loan against the complete amount saved in the PPF account. Homebuyers planning to avail a home loan against PPF account are eligible to borrow up to a maximum of 25% of the balance amount at the end of second financial year, immediately preceding the year of loan application.

For example, if a person has applied for a home loan against a PPF account in the financial year 2025-26, the loan amount will be based on 25% of the balance amount in the PPF account in the financial year 2023-24.

Loan tenure and repayment terms: The tenure of the home loan obtained through PPF is usually fixed for a period of three years. The borrower is required to repay the loan within this period. Otherwise, the outstanding dues, if unpaid, will be adjusted against the PPF balance.

The principal amount of a PPF home loan must be repaid before the end of thirty-six months from the first day of the month following the month in which the loan was sanctioned.

After the borrower repays the principal amount, they must repay the interest amount within one or two instalments. Until the loan is repaid by the borrower, the PPF account holder does not incur any interest income on the balance.

Interest rates: The interest rates for PPF home loans are 1% higher than the existing PPF interest rate. Earlier, the rate was 2% but was later changed to 1%. Hence, an interest rate of 8.1% is applicable, given the PPF interest rate of 7.1%.

Where can you apply for a PPF home loan?

Those planning to opt for a home loan against PPF must ensure they have a PPF account. They can opt for the savings scheme by approaching any authorised bank in their location. They can submit an application to open a PPF account along with relevant documents such as:

• Identity proof
• Passport-size photograph
• PAN card
• Aadhaar card
• Address proof
• Nomination form

Steps to avail a PPF home loan?

• Eligibility check: Borrowers must ensure the PPF account is between three and six financial years.
• Loan application: Approach the lender and complete the home loan application form.
• Supporting documentation: Submit the application form along with relevant documents, including the PPF passbook.
• Verification and loan disbursal: The home loan lender will verify the application and supporting documents and approve the loan if all conditions are fulfilled.

Housing.com News Viewpoint

Opening a PPF account comes with multiple benefits. It is a secure investment option as an individual can make significant long-term savings, which is beneficial in providing a secure future. Besides the tax exemption the PPF scheme offers, the option to avail of a PPF home loan equips the individual to finance their home purchase without disrupting their funds. Moreover, an interesting thing to note is that PFF loans are secured loans unlike personal loans. The PPF account serves as a collateral and unpaid dues can be adjusted against the PPF balance.

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