ED Sends Notice To Indians Buying Property In Dubai Using Credit Cards

Amid a weak realty market in Dubai due to the war, many may get tempted to invest in properties in the city to gain from a price surge after the end of the war.
However, one must keep in mind the legal ways of payment to do so, as some individuals have come under the scanner due to unknowingly violating India’s foreign exchange norms.

Indian nationals who bought property in Dubai using credit cards have come under the lens of the Enforcement Directorate (ED), according to a report by The Economic Times.

The agency is sending notices to people who have bought property in Dubai via credit cards, as doing so is not allowed under the Liberalised Remittance Scheme (LRS) of the RBI (Reserve Bank of India).

The agency sent notices to at least three individuals in February.
The individuals are suspected to have either used international credit cards during visits to the United Arab Emirates (UAE) to pay the initial deposit or clicked on payment links sent by UAE developers.

Since credit card transactions are similar to short-term loans, the RBI’s foreign exchange regulations do not allow such methods to be used to buy property overseas.

The LRS scheme by the RBI requires resident individuals to buy stocks and apartments abroad through the transfer of tax-paid funds via official banking channels, the report said.

According to experts cited in the report, such individuals may have bought property using credit cards without being aware of Indian laws.
They may approach the RBI to regularise the mode of payment. The RBI may take a lenient view as the money was legitimate, even if the mode of payment was wrong, according to the experts.

However, before admitting the violation and seeking to settle the contravention (compounding), individuals would have to wait for administrative proceedings to be completed.

The process could require individuals to either sell the property when the realty market is down due to the war or reverse the original payment by remitting fresh funds through banks and asking the builder to refund the amount paid via credit card.