Indian property buyers have been warned not to use the International Credit Card (ICC) to buy property abroad, as it violates the laws of many countries as well as causing serious economic and legal risk. Real estate and tax experts say that credit cards can only be used for current account transactions (such as shopping, travel, education), not for capital account investment like property abroad. Recently, some Indian buyers faced regulatory problems for this reason while purchasing property in Dubai.
Anderson UAE CEO Anurag Chaturvedi said that buying property abroad under Indian law, especially the Foreign Exchange Management Act (FEMA), is considered to be a capital account transaction. While the use of international credit cards is limited to current account transactions. Thus, payment of property abroad from ICC is to ignore the rules of the Reserve Bank of India (RBI). The RBI has clarified that such investment is possible only under Liberalized Remittance Scheme (LRS).
According to the LRS, Indian residents can send abroad to a maximum of $ 250,000 in a financial year through authorized banks, including tax compliance and regulatory monitoring. Therefore, payment for property abroad should only be accompanied by authorized banks and proper documentation.
Chaturvedi warned that the buyer may have to face investigations at RBI, Income Tax Department and Enforcement Directorate (ED) for violating this rule. Also, such payment from credit card is also financially harmful as it includes additional costs such as high interest rates, foreign currency fees and late fees.
Gaurav Keswani, CEO of JSB Incorcation, also said that Indian investors should follow FEMA and LRS while purchasing property at Dubai or any abroad. All payment should be done through the authorized bank and the buyer should have at least one year old bank account.
Experts say that developers and agents also have responsibility to promote transparent and transactions according to the rules. Experts have advised investors to take financial or legal advice before investing money in any foreign property and make all the payment from the correct banking channel.
