Buying Dubai property via credit card lands Indians in trouble, ED issues notices

Indian residents who purchased property in Dubai using international credit cards have come under scrutiny, with the Enforcement Directorate issuing notices to several buyers. The action follows concerns over violations of foreign exchange regulations, particularly regarding the mode of payment used for overseas property transactions.

According to information available, multiple individuals were served notices in February, seeking explanations about both the source of funds and the payment mechanisms adopted. Many buyers had reportedly used international credit cards during visits to the UAE or made payments through online links provided by developers, often unaware that such methods could breach Indian financial regulations.

The core issue lies in the classification of credit card payments as a form of borrowing. Under India’s foreign exchange laws, residents are not permitted to use borrowed funds to acquire immovable property abroad. Transactions involving overseas property purchases fall under capital account activities and must strictly adhere to prescribed rules.

As per the Reserve Bank of India’s Liberalised Remittance Scheme, individuals can remit up to $250,000 annually for permitted purposes, including property purchases abroad. However, these funds must be routed through authorized banking channels and should be from legitimate, tax-paid income. Credit card transactions do not qualify as an approved mode under this framework.

Those receiving notices now face the challenge of regularising their transactions. This may involve reversing the original payments, remitting funds through proper channels, or opting for compounding by admitting the violation and paying a penalty. In some cases, buyers may be compelled to sell their properties, particularly amid a weak market, to resolve compliance issues.