New Delhi, March 2026 – The Enforcement Directorate is looking into how some Indians bought Dubai properties using international credit cards, a move that may have sidestepped India’s foreign exchange rules. Notices were served in February 2026 asking buyers to explain their source of funds, since these deals are supposed to use tax-paid funds through official banking channels. ED has served notices to at least three persons for using their credit cards to pay the initial deposit or for clicking payment links sent by UAE developers. As such transactions fall under capital account activities, they must comply with RBI norms. Affected individuals may need to regularise payments through official channels and opt for compounding to resolve regulatory issues.
The Regulatory Framework and Why Credit Cards Trigger FEMA
While it is legal to buy properties abroad by resident individuals under the Liberalised Remittance Scheme limit of USD 2,50,000, doing so with a credit card is not allowed under FEMA regulations. Credit card transactions are essentially loan transactions and do not require permission from RBI for day-to-day current account activities, but property purchases are capital account transactions, and credit cards are not an approved instrument for such transactions.
Under RBI guidelines, Indian residents can invest abroad under the LRS, which permits remittances up to $250,000 per year. However, these transfers must be made using tax-paid funds through authorised banking channels, not through credit instruments. Some who used international credit cards to buy properties perhaps did so to preserve their annual LRS limit.
What Buyers Are Being Asked to Do
To fix things and avoid further trouble, buyers are being told to send the money through approved banks and undo the original card payments. If they do not sort it out, they might have to sell their Dubai properties, possibly at a loss given the current market. According to CA Pankaj Bhuta, even where the ED has initiated investigation against a resident individual, the latter may opt for compounding before the RBI at any time till the conclusion of adjudication proceedings. Such compounding is typically subject to a no-objection from the ED. In cases where this is granted, the RBI is empowered to cap the compounding amount at ₹2 lakhs.
