Why Dubai Real Estate Has No Buyers: All Indians (and Pakistanis) Who Own Property In Dubai Are Being Served Tax Investigation Notices

We have warned our clients and investors over the last several years that all countries will investigate their citizens who have kept their hidden illegal undeclared assets in Dubai.

Once Dubai signed the EXPO 2020 agreement in 2012, it was like a death wish for it's real estate sector.

They agreed to issue multiple entry visas (which they approved sometime in 2016), they agreed for international accounting practices (mandated under VAT laws), they agreed to implement VAT and other indirect taxes, they also agreed to share information on banking assets, real estate, visa entries etc (visa entries have been shared with Canada a few years ago) with any Govt under OECD data sharing agreement. All of this was agreed in order to get the EXPO 2020.

Data sharing by Dubai began in Jan 2017 after many years of warnings.

Russians, Britishers, Iranians, Qataris, Yemenis, Europeans, Americans, Syrians, Libyans, Bangladeshis, Canadians, Australians etc who all were big investors in Dubai have all mostly departed.

But Indians were the boldest, they never left and kept coming in thousands and until this day many believe that markets will rebound despite the facts staring them in their face! haha

On 7 Aug 2018, we had explained why property prices in Dubai will keep falling for years to come.

Why Property Prices In Dubai Will Keep Falling For Years

Indians kept arriving because they wanted to leave India and wanted to stash their assets in a "stable" Dubai. Little did they know that since 2015 real estate prices have declined every single month and every single year until date and will continue to do so for years to come. 

On top, Indian Govt has finally woken up in Oct 2018 and has started sending tax enquiry letters based on data that they have been collecting since 2012 when lndia first changed it's Income tax laws on declaring overseas assets by Resident Indians.

Indian Govt has been collecting data both officially through Income Tax returns as well as through unofficial channels through Income Tax agents sitting in several countries including the UAE for several years. 

As a bonus, UAE agreed to share all data with India and with all other countries since Jan 2017.

Meanwhile, most Pakistanis stopped buying in Jan 2017 when they discovered that data will be shared with the Pakistan Govt. 

Even their PM Sharif went to jail partly due to Dubai based undeclared company. Now Pakistanis (and all other nationalities) have stopped buying, if they have any illegal and undeclared assets which is pretty much 90% of buyers in Dubai.

Just on Sept 21, 2018, we warned that 2,700 Pakistanis have been identified and are being sent letters by the Supreme Court of Pakistan for investigation of their assets especially in Dubai. This process caught speed after the new Imran Khan led Govt was elected a few days prior.

Pakistan Govt Wants ALL It's Money Back From UAE That Is Invested In UAE Properties

Just within a month, the number of Pakistanis being investigated has jumped 4 fold to about 10,000.

10,000 properties of Pakistanis discovered in Dubai and England: Report

Now, the Indian Govt has yesterday on 19 Oct 2018 declared that they too want to investigate all Indians who have properties in Dubai.

Since they do not know who has undeclared funds and who doesn't so basically all Indians whose name is on the database provided by Dubai Govt will be sent an enquiry to verify the legality of their purchases.

The Govt of India has finally woken up and is investigating over 7,500 Indians who own property in Dubai.

Target is Resident Indians but it will also cover NRI’s because Govt doesn’t know who got money from India and who didn’t and whether taxes have been paid.

The penalties are severe:

"Non-disclosure can attract a tax of 30 per cent and penalty of up to 300 per cent of the tax along with criminal prosecution under the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act (Black Money Act), which was introduced in 2015."

Just in June 2018, India had said that the number of people under investigation was 5,800. By October 2018, the number has already jumped to 7,500.

7,500 investigation of Indians is the number today (rising from 5,800 in June), expect this number to rise much higher within a year.

19 Oct 2018: Under I-T scanner: 7,500 Indians who own prime homes in Dubai

June 2018: Dubai: 5,800 Indians under investigation by Indian intelligence for high end property ownership in Dubai

Expect Income Tax notices for whoever has anything to do with India and has invested anywhere abroad because Dubai is just the beginning.

Next destination for income tax investigation by India should be London or Singapore.

The data sharing began in Jan 2017 and it was also in the news in Dec 2016.

UAE to start sharing financial data of individual and legal entities

Whoever did not follow the changes in laws of UAE has to blame themselves, their accountants, their real estate brokers and their own so called financial advisers. Obviously, they are not our clients.

Meanwhile, as we had predicted that by year 2018, there will only be sellers in Dubai real estate market and all will be selling under panic conditions.

Many nationalities like Russia, UK, US, Korea, Canada, Australia, Sweden etc lost a lot of money in 2009 crisis and never returned. 

Many others are brotherly countries like Yemen, Qatar, Libya etc who have been banned or outright war has started, some others like Saudi, Kuwait, Oman, Lebanon etc are pulling back because of problems in their home countries amid a need for liquidity, many others are mostly banned in UAE like Bangladesh, Iran, Syria etc (unless they are very long term residents).

In 2018, Govts of Pakistan and India have begun investigating every single property owner in UAE hence, logically, they cannot become new buyers unless they are 100% clean which almost no one is except the 20 year plus old residents of UAE.

Emiratis get free houses so they will not buy enmasse if they have seen the crisis and depreciating asset values for 4 years in a row while their businesses are already crippled.

Hence, the million dollar question is: Who will buy if EVERYONE wants to sell?

Total real estate across UAE is estimated to be more than USD 2-3 trillion, that's a massive number of properties.

Meanwhile, Indians (as well as Pakistanis) have a major problem in the weeks ahead, if they own or have ever owned a UAE based property or bank account anytime over the last 10-15 years and did not declare it in India.