Dubai Real Estate Deals Face Regulatory Scrutiny: Indian Buyers in a Bind
Indian property buyers in Dubai are facing regulatory challenges after using international credit cards (ICCs) for property purchases. They are now seeking ways to regularize their transactions to avoid legal troubles.
Dubai Real EstateInternational Credit CardsRbiLiberalised Remittance SchemeTaxcollectedatsourceReal EstateAug 04, 2025
While no explicit regulation prohibits ICC usage for overseas property purchases, banking professionals interpret RBI notifications as restrictive of such practices. To address scrutiny from income tax and enforcement authorities, these investors are pursuing corrective measures. They plan to remit funds through RBI's Liberalised Remittance Scheme (LRS), while cancelling previous credit card transactions, citing error. Subsequently, they expect refunds from builders, failing which property disposal becomes necessary.
"Indian residents who have unintentionally paid money through credit card for purchase of property outside India need to approach RBI to regularise their mode of payment. RBI should take a lenient view as the money paid through credit card is a legitimate payment and only the mode of payment was wrong. The regulator should compound the contravention if applied for and need not ask to unwind the transaction or sell the property," said Rajesh Shah, partner at the CA firm Jayantilal Thakkar & Co, as quoted by news agency PTI. While compounding requires accepting the violation and paying fines, some buyers prefer discretion, quietly cancelling credit card transactions.
The LRS permits resident individuals annual transfers of $250,000 for overseas assets and online purchases. ICC usage within India for foreign purchases counts towards LRS limits, whilst overseas travel expenses are exempt. Property purchases via ICC remain non-compliant, regardless of transaction location. RBI's LRS circular specifies maintaining bank accounts for a minimum of one year before capital account remittances.
According to Moin Ladha, partner at the law firm Khaitan & Co, quoted by ET, "Purchase of property overseas is permitted specifically under Foreign Exchange Management (Overseas Investment) Rules, 2022. These rules prescribe the mode and conditions permitting such acquisition, which include inheritance, gift, funds in a resident foreign currency account earned as an erstwhile NRI, and remittance under the LRS. Since general permission is not available to acquire a property by using an ICC, any such acquisitions need to be regularised (by a post facto approval or sale of the property) followed by compounding the interim non-compliance with RBI." Property purchases abroad remain subject to 20% TCS under section 206C(1G)(a) of the I-T Act, regardless of RBI's stance on transactions, notes Ashish Karundia, founder of Ashish Karundia & Co.
Frequently Asked Questions
What are the regulatory challenges faced by Indian property buyers in Dubai?
Indian property buyers in Dubai are facing regulatory challenges after using international credit cards (ICCs) for property purchases, which are not designed for such transactions. This has led to scrutiny from income tax and enforcement authorities.
What is the Liberalised Remittance Scheme (LRS) and how can it help?
The LRS permits resident individuals annual transfers of $250,000 for overseas assets and online purchases. Buyers can remit funds through this scheme to regularize their property transactions and avoid legal issues.
What is the 20% tax-collected-at-source (TCS) and how does it apply?
Property purchases abroad are subject to 20% TCS under section 206C(1G)(a) of the I-T Act, regardless of RBI's stance on transactions. This tax must be paid to regularize the purchase.
What are the consequences of using ICCs for property purchases?
Using ICCs for property purchases is non-compliant with RBI regulations. Buyers may face legal scrutiny and may need to regularize their transactions by cancelling credit card transactions or selling the property.
What steps can buyers take to regularize their transactions?
Buyers can remit funds through the LRS, cancel previous credit card transactions, and seek post-facto approval from the RBI. They may also need to pay fines to compound the interim non-compliance.
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