ED Questions Indians Over Dubai Property Buys, Focus on Crypto Payments
Several Indian residents who purchased real estate in Dubai are now under the scanner of the Enforcement Directorate (ED), which has begun questioning them about the source of funds used in these property deals, according to a report by The Economic Times.
The agency is acting on information received from the Income Tax (I-T) department, which had already issued notices to many of these individuals last year. What’s raised red flags is the lack of proper documentation—particularly missing bank transaction records that would show how the payments were made.
The ED is now investigating potential violations of the Foreign Exchange Management Act (FEMA) and the Prevention of Money Laundering Act (PMLA), especially focusing on cases where the usual legal route for sending money abroad may not have been followed.
Rules Around Foreign Property Purchases
Under Indian law, residents can send up to $250,000 abroad per financial year for investments like property purchases—but only through authorised banking channels. This is regulated under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS).
However, sources told ET that many of the recent cases under probe didn’t comply with these norms. Instead, some buyers allegedly used alternate methods such as cryptocurrencies or high-limit international credit cards to fund their property purchases.
Cryptocurrency Raises Red Flags
One area of concern is the use of cryptocurrencies such as Bitcoin and Ethereum to pay for homes in Dubai. Anup P. Shah, a partner at PPS & Co., told ET that some individuals directly transferred crypto from their wallets to those of Dubai-based real estate developers. He explained that such transactions violate FEMA rules, as they bypass Indian banks and avoid scrutiny under LRS.
Even in situations where crypto assets were legally acquired, routing them via blockchain to make cross-border payments without going through authorised dealers remains a grey area—and is largely seen as a violation.
The motivations for such transactions vary. Some buyers reportedly used crypto to dodge India’s high conversion fees or to preserve their LRS limits. Others had crypto holdings on foreign platforms, which itself is not permitted under Indian regulations.
Not Declaring Assets? Big Trouble
Many buyers assumed their Dubai properties wouldn’t be discovered by Indian authorities—since most international information-sharing agreements only cover bank accounts and securities, not physical assets. But this may no longer hold true.
According to ET, the ED may have gathered property ownership data from local sources in Dubai, possibly with help from another country. This has triggered potential action under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act.
Those who can’t show a legitimate money trail could face penalties as high as 120% of the property’s value. Worse, if money was transferred using illegal channels like hawala, the ED could treat the property as “proceeds of crime” under PMLA—leading to attachment or even confiscation, with no option to just pay a fine and move on.
“If the I-T department proves violations under the Black Money Act, it becomes a scheduled offence, paving the way for ED action under PMLA,” an official explained.
Developers Welcomed Crypto
Dubai’s real estate market has been accepting crypto for years. Harshal Bhuta, partner at P.R. Bhuta & Co., noted that developers in the UAE routinely accept digital currencies like Bitcoin and Ethereum.
While UAE’s anti-money laundering and KYC laws do cover such transactions, Bhuta cautioned that “what’s legal under Dubai’s rules doesn’t automatically comply with Indian laws.”
Depending on how the payment was structured, Indian buyers may have unknowingly breached FEMA norms, LRS rules, and possibly committed cross-border payment violations.
As the probe continues, what once seemed like a fast, discreet way to buy luxury property abroad may now land several people in serious legal trouble.
