Buying a home abroad may sound exciting, but for some Indians who invested in Dubai, it has now turned into a legal headache. A few buyers who used credit cards to pay for these properties are facing questions from authorities back home.
The Enforcement Directorate (ED) has issued notices to some Indians who purchased property in Dubai using credit cards, reported The Economic Times. At least three individuals received notices in February, asking them to explain the source of funds used in these transactions.
These buyers had either used international credit cards (ICC) during visits to the UAE or made payments through links shared by property developers. Many of them may not have realised that this method could violate Indian rules.
Under Indian foreign exchange laws, using borrowed money to buy property abroad is not allowed. Credit card spending is treated as a short-term loan, which makes such transactions questionable.
The Reserve Bank of India (RBI) allows overseas investments under the Liberalised Remittance Scheme (LRS). However, this route requires individuals to send tax-paid money through proper banking channels. Credit card payments do not follow this process, which is why these deals have come under scrutiny.
Those who have received notices may now have to correct how the payment was made. This could involve penalties or even selling the property, possibly at a loss, especially as Dubai’s property market is currently seeing some uncertainty.
Rajesh Shah, partner at CA firm Jayantilal Thakkar and Co, while speaking to the ET said many people may have made such payments unknowingly. “The recent round of ED notices have gone to individuals who may have unknowingly used credit cards to buy UAE properties. They should approach RBI to regularise the mode of payment. RBI may take a lenient view as the money is legitimate even if the mode of payment is wrong.”
To resolve the issue, buyers may need to go through a process called compounding. This means accepting the violation and paying a penalty to settle the case.
Before that, they may have to take corrective steps, such as sending fresh funds through banks and asking the developer to refund the amount paid via credit card.
“The regularisation process could involve remitting fresh funds through banks and instructing the builder to send back the amount that was paid with credit card. In certain circumstances, RBI may ask buyers to sell the property and bring back funds,” Shah explained.
Experts say buying property abroad falls under capital account transactions, which come with strict rules. Credit cards are meant for daily expenses like travel or shopping, not for large investments like real estate.
This episode serves as a reminder that while investing overseas is allowed, it must be done through the correct legal route. Missing these details, even unknowingly, can lead to trouble later.