Indian citizens who purchased properties in Dubai are under the scanner of the Enforcement Directorate (ED) for the payment methods used. Many buyers may have inadvertently violated foreign exchange regulations by using credit cards for overseas property transactions.
Under India’s Foreign Exchange Management Act (FEMA), credit card payments for immovable property abroad are treated as short-term borrowing, which is not permitted.
The RBI’s Liberalised Remittance Scheme (LRS) is the only authorized route, allowing up to $250,000 per year through official banking channels. Investors are now reversing payments, facing compliance costs, and risking penalties for non-adherence.
Why Credit Card Payments Raise Compliance Issues
In India, using credit cards to buy property abroad is treated as short-term borrowing, which is not allowed under the Foreign Exchange Management Act (FEMA). The only legal way for Indian residents to invest in overseas real estate is through the Reserve Bank of India’s Liberalised Remittance Scheme (LRS).
Many investors who used international credit cards (ICCs), either while visiting Dubai or via online payment links shared by developers, are now under scrutiny. The Enforcement Directorate (ED) may ask them to explain where the money came from and whether it followed legal rules.
Reports suggest that at least three buyers were questioned earlier this year, highlighting the risks of bypassing FEMA and the importance of using the authorized LRS route for overseas property investments.
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The Legal Framework for Overseas Property Investment
Indian residents can buy property overseas only through authorized channels under FEMA and the Liberalised Remittance Scheme (LRS). Key rules include:
- Remittance limit of $250,000 per financial year (April–March)
- Funds must be tax-paid
- Transfers must occur through authorized dealer banks
- Borrowed funds or credit cards cannot be used
- Corporates, trusts, partnerships and Hindu Undivided Families are not eligible
In Feb 2026, the ED seized 8 Dubai properties worth Rs 27.83 Cr in a hawala-funded case. Many buyers are now reversing card payments and re-routing through LRS to comply with the law. Violations can lead to fines, asset seizure, or imprisonment.
Practical Implications for Buyers
Indians who used credit cards to buy property in Dubai now face several challenges. They may need to reverse payments and re-route funds through the RBI’s LRS, which is the only legal way to invest abroad. Some buyers could also face financial losses if the property market is weak.
The ED’s investigation is a clear reminder that overseas property purchases must follow India’s foreign exchange rules.
Key Points to Remember
- Always use the RBI’s LRS for buying property abroad.
- Do not use credit cards or foreign loans for real estate purchases.
- Ensure all funds are tax-paid and transferred via authorized banks.
- Breaking these rules can lead to heavy fines, legal issues, or asset seizure.
