RBI warns Indian buyers against using credit cards for overseas property

Indian property buyers have been cautioned against using international credit cards to make down payments on real estate abroad, as it could lead to legal and financial complications.

Experts explained that under India’s Foreign Exchange Management Act (FEMA), property purchases abroad are classified as capital account transactions. However, international credit cards are permitted only for current account transactions such as travel, shopping, and education-related expenses.

“Using an international credit card for real estate bypasses the Reserve Bank of India’s (RBI) approved framework — the Liberalised Remittance Scheme (LRS), which is the only legal channel for Indian residents to invest in overseas property,” said Anurag Chaturvedi, CEO of Andersen UAE.

The LRS allows Indian residents to remit up to 250,000 US dollars per financial year through authorised banks, ensuring regulatory oversight, tax compliance, and proper documentation. Bypassing this process amounts to a FEMA violation and may invite investigations by the RBI, Income Tax Department, and Enforcement Directorate.

Aside from regulatory risks, experts warn that ICC usage for property is financially unsound due to high interest rates, forex markups, and penalties. Developers may accept a small reservation amount (less than Dh80,000) to secure property until full transfer is completed, but the main payment must follow RBI guidelines.

Industry specialists stress that Indian investors should always use the LRS route through authorised banks and seek professional advice to avoid penalties. As Chaturvedi put it: “Buying property abroad with an international credit card is like trying to pay for a house with a travel wallet – it’s not permitted and could get you into serious trouble.”