Indian property buyers are advised against using international credit cards for down payments due to legal risks and potential violations in some countries.
Experts in real estate and taxation emphasize that credit cards are intended for current account transactions like shopping and travel, making them unsuitable for foreign investments.
Some Indian buyers have encountered regulatory challenges when purchasing property in Dubai using international credit cards.
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Anurag Chaturvedi, CEO of Andersen UAE, explained that under Indian law, particularly the Foreign Exchange Management Act (Fema), overseas property purchases are considered capital account transactions. However, international credit cards are only approved for current account transactions such as travel and education payments.
“Using an international credit card for real estate payments abroad circumvents the Reserve Bank of India’s (RBI) authorized framework, specifically the Liberalised Remittance Scheme (LRS), the sole legal channel for Indians to invest in foreign property,” Chaturvedi told Khaleej Times.
RBI’s Position
The Liberalised Remittance Scheme allows Indian residents to remit up to $250,000 annually through authorized banks, ensuring compliance with tax regulations and oversight.
The RBI has clearly stated that using ICCs for real estate, which is a capital outflow, must adhere to LRS guidelines. “Bypassing this process violates Fema,” he added.
Some developers accept a partial down payment as a reserve, giving buyers additional time to finalize payment transfers, typically under Dh80,000.
Gaurav Keswani, CEO of JSB Incorporation, emphasized that Indian investors eyeing Dubai properties must comply with Indian regulatory standards.
“While using international credit cards seems convenient, it conflicts with Fema and LRS standards. These cards are for current account transactions, not capital investments like real estate,” he said.
He further explained that according to RBI guidelines, remittances for overseas property must be processed through authorized banks under the $250,000 LRS cap, with proper documentation and a bank account held for at least one year.
Risks of Using ICCs
Anurag Chaturvedi warned that using international credit cards for property abroad can lead to serious legal and financial issues, including investigations and penalties.
These include Fema violations, potential investigations by the RBI, Income Tax Department, and Enforcement Directorate (ED), as well as financial imprudence due to high interest rates, foreign exchange fees, and possible late charges.
“These risks are not only regulatory but also economic, making this practice both legally hazardous and financially unsound,” he added.
Chaturvedi urged buyers to use the Liberalised Remittance Scheme via a registered bank, ensure transactions are fully documented and reported as per RBI and tax authority requirements, and consult financial or legal advisors before foreign investments.
“Paying for property abroad with an international credit card is like trying to buy a house with a travel wallet – it’s prohibited and could lead to severe consequences. For peace of mind and legal certainty, always use proper banking and regulatory channels for overseas investments,” he added.
Gaurav Keswani highlighted the importance of transparency and compliance among all stakeholders, including developers and agents.
