Central Bank sounds alarm on misleading overseas property investment ads

The Central Bank (CB) has issued a stern warning to the public regarding advertisements promoting investments in overseas real estate, cautioning against potentially misleading claims and illegal financial arrangements.

The move comes amidst a backdrop of the country’s ongoing efforts to manage its foreign exchange reserves and maintain economic stability.

In a press release dated June 20, the CB noted a recent surge in print and social media advertisements encouraging Sri Lankan residents to purchase immovable property abroad.  These promotions have also been found to offer guidance on securing foreign financing for such investments, a practice the Central Bank has highlighted as a violation of current regulations.

This cautionary measure is rooted in the regulations stipulated under the Foreign Exchange Act, No. 12 of 2017. The Central Bank has reiterated that resident individuals are heavily restricted in their ability to make payments for overseas property. 

According to the CB, payments for acquiring or investing in property abroad are only permitted from Personal Foreign Currency Accounts (PFCAs), and are capped at a limit of US$ 20,000 or its equivalent in another designated foreign currency. Furthermore, the use of funds from Business Foreign Currency Accounts (BFCAs) for such overseas property investments is explicitly prohibited. 

A key point of concern for the monetary authority is the promotion of foreign loans to finance these property purchases. The press release unequivocally states that resident individuals are not permitted to obtain foreign loans or raise financing from non-residents for any purpose, which includes investments in overseas property. 

The Central Bank strongly advises the public not to be swayed by these advertisements and the associated offers of foreign financing.  It has also warned that any person found to be involved in or facilitating such unauthorised foreign exchange transactions will face legal action under the Foreign Exchange Act. 

The CB has urged the public to remain vigilant and adhere to the established legal framework for foreign exchange transactions.