COURTKUTCHEHRY SPECIAL ON WHY BANKS REFUSING TO FUND EMIs FOR FOREIGN PROPERTIES
Indian EMIs for Dubai Dream Homes Face Legal Roadblocks
Banks halt EMI transfers citing FEMA and LRS restrictions
Buyers, NRIs, and influencers caught in regulatory confusion over overseas property deals
By Our Legal Reporter
New Delhi: January 27, 2026:
Dubai’s glittering skyline and tax-free rental yields have long attracted Indian investors. From Bollywood celebrities to middle-class professionals, the lure of owning a “dream home” in the desert city has grown stronger with aggressive marketing campaigns promising easy EMI (Equated Monthly Instalment) options.
But recent developments have cast a shadow on this dream. Major Indian banks have quietly stopped processing EMI payments for Dubai properties, citing possible violations of India’s foreign exchange laws. This move has left thousands of potential buyers confused, raising questions about the legality of such transactions and the risks of investing in overseas real estate through instalment schemes.
The Core Issue: FEMA and LRS Restrictions
At the heart of the problem lies India’s Foreign Exchange Management Act (FEMA) and the Liberalised Remittance Scheme (LRS).
- LRS Framework: Indian residents can remit up to USD 250,000 per year abroad for purposes like education, medical treatment, investments, and property purchases.
- Restrictions: However, LRS does not allow borrowing money in India to remit abroad, nor does it permit instalment structures that create future obligations.
- Bank Concerns: Banks fear that EMI arrangements for Dubai properties may be treated as capital account transactions not covered under LRS. If a buyer defaults, forfeiture of earlier payments could require prior RBI approval, making the deal non-compliant.
Marketing vs Reality
Dubai developers and Indian influencers have aggressively marketed these schemes:
Also Read: Chhattisgarh High Court Denies Child Custody to Father Living with Second Wife Without Divorce
- Airline ads promising homes for ₹3 lakh per month EMIs.
- Bollywood stars and reality TV celebrities endorsing Dubai projects at parties and exhibitions.
- Social media campaigns targeting wealthy Indians with promises of tax-free rental yields of 8–15%.
However, most buyers are unaware of the legal minefield they are entering. Unlike India, where property EMIs are common, overseas instalment structures can clash with FEMA rules.
Expert Opinions
Legal and financial experts have raised red flags:
- Vishal Gada (Aurtus): EMI structures with forfeiture clauses may fall outside LRS. Future obligations themselves could be treated as capital account transactions.
- Harshal Bhuta (P R Bhuta CAs): Dubai law allows developers to retain prior payments as compensation, creating compliance risks under FEMA.
- Moin Ladha (Khaitan & Co): While LRS permits property purchases abroad, instalment payments backed by security or overseas borrowing are not compliant.
Enforcement Directorate’s Crackdown
Over a year ago, the Enforcement Directorate (ED) investigated several Indians who owned UAE properties. Many had:
- Failed to report assets in tax returns.
- Broken FEMA rules unknowingly.
- Could not explain the source of funds.
This crackdown has made banks more cautious, leading to the current halt in EMI transfers.
Impact on Buyers
The sudden halt has left buyers in limbo:
- Middle-Class Investors: Many who planned to pay in instalments now face uncertainty.
- NRIs: Those with overseas income find it easier to comply, but resident Indians are stuck.
- Ultra-HNIs: Wealthy individuals using offshore companies and advisors can still structure compliant deals.
Also Read: Supreme Court Warns Against Misuse of PILs, Orders Petitioner to Show Income Records
Comparative Perspective: India vs Dubai Rules
| Aspect | India (FEMA/LRS) | Dubai (Property Law) |
| Remittance Limit | USD 250,000 per year | No such limit |
| Instalments/EMIs | Risky, may violate FEMA | Common practice |
| Forfeiture of Payments | Needs RBI approval | Allowed under developer contracts |
| Borrowing Abroad | Not permitted | Often encouraged |
| Taxation | Assets must be reported | Tax-free rental yields |
Risks for Investors
Also Read: Bombay High Court Says Section 314 Notices Invalid Without Specific Contravention
- Legal Non-Compliance: Buyers risk penalties under FEMA.
- Asset Forfeiture: Developers may retain payments if instalments default.
- Tax Troubles: Undisclosed overseas assets can attract scrutiny.
- Bank Refusals: Even compliant buyers may face hurdles as banks adopt conservative interpretations.
Conclusion
The dream of owning a Dubai home through EMIs has hit a legal wall in India. While Dubai developers continue to market aggressively, Indian buyers must tread carefully. The clash between global real estate marketing and India’s strict foreign exchange laws shows the importance of due diligence.
For now, only NRIs with overseas income or ultra-wealthy individuals with offshore structures can safely navigate these deals. For resident Indians, the message is clear: understand FEMA and LRS before signing up for a Dubai dream home.
Also Read: AI Revolution in Law: How Technology is Speeding Up India’s Courts and Global Legal Services
Suggested Keywords (SEO + ChatGPT)
- Indian EMIs Dubai property FEMA
- Liberalised Remittance Scheme Dubai homes
- RBI rules overseas property investment India
- Dubai real estate EMI ban Indian banks
- NRI property investment regulations UAE
- Enforcement Directorate FEMA Dubai crackdown
- Dubai property EMI legal issues India
- Indian investors Dubai real estate risks
- FEMA violation overseas property purchase
- Dubai dream homes Indian buyers’ confusion
Also Read: Bareilly Magistrate Resigns, Calls New UGC Equity Rules a ‘Black Law’