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Also Read: NRI Property Transfer in India: Key Considerations & Legal Guidelines

Legal Framework for Foreign Property Ownership in India

Property ownership for foreigners in India is primarily regulated by:

1. Foreign Exchange Management Act, 1999 (FEMA)

2. Guidelines issued by Reserve Bank of India (RBI)

These regulations aim to ensure transparency and legal compliance in foreign transactions involving immovable property in India.

Under FEMA and RBI rules, foreign individuals are broadly classified into three categories:

1. Non-Resident Indians (NRIs) – Indian citizens residing outside India.

2. Overseas Citizens of India (OCIs) – Individuals of Indian origin who hold foreign citizenship but have an OCI card.

3. Foreign Nationals – Citizens of other countries who are neither NRIs nor OCIs.

Why this classification matters: Each group has different rights and restrictions on property purchase. While NRIs and OCIs can freely invest in residential and commercial properties, foreign nationals face stricter restrictions and often need prior approval from RBI.

Also Read: NRI Property Partition in India: Process, Laws, and Legal Challenges

Can NRIs and OCIs Buy Property in India?

NRIs and OCIs enjoy property rights similar to those of resident Indians — with a few exceptions.

Permitted:

1. Purchase of residential and commercial properties without prior approval from RBI.

2. Acquisition of property through inheritance or gift from a resident Indian, NRI, or OCI.

3. Renting or leasing of owned property.

4. Selling or transferring property to an Indian citizen, NRI, or OCI.

Not Permitted:

1. Buying agricultural land, plantation property, or farmhouses.

2. Purchasing property with funds from outside legal banking channels.

Payment Rules:

1. Payment must be made in Indian Rupees (INR) only.

2. Funds can be remitted through:

   1. Normal banking channels from abroad.

   2. NRE (Non-Resident External) account.

   3. NRO (Non-Resident Ordinary) account.

   4. FCNR (Foreign Currency Non-Resident) account.

Note: The property must be registered under the buyer’s name, and the transaction should comply with FEMA provisions to avoid penalties.

Also Read: Illegal Possession of NRI Property in India: A Complete Guide to Your Legal Remedies

Can Foreign Nationals Buy Property in India?

For foreign nationals who are neither NRIs nor OCIs, the rules are much stricter.

1. A foreign national residing outside India cannot purchase immovable property in India.

2. A foreign national residing in India for more than 182 days in the preceding financial year may acquire property for personal residential use, but RBI approval is required.

3. Foreign nationals from countries such as Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, and Bhutan face additional restrictions and must obtain prior RBI permission even for lease agreements beyond five years.

Exceptions:

1. Foreign companies with branch offices or subsidiaries in India may acquire property for business purposes, subject to RBI guidelines.

2. Lease agreements of less than five years are allowed without prior approval.

Also Read: NRI Estate Planning: Should You Draft Separate Wills for Global Assets?

Types of Property Foreigners Can Buy

The type of property plays a major role in determining whether a foreigner can invest.

Residential Property

1. NRIs and OCIs can buy any number of residential properties (flats, villas, houses).

2. They can also rent out or lease these properties.

3. Foreign nationals without OCI status generally cannot buy residential property, except with RBI approval (if residing in India).

Commercial Property

1. NRIs and OCIs can freely invest in commercial real estate — offices, retail spaces, warehouses, etc.

2. Foreign companies can acquire commercial property for business use through their Indian branch or subsidiary.

Agricultural Land, Plantation Property, and Farmhouses

1. NRIs, OCIs, and foreign nationals cannot buy agricultural land, plantation property, or farmhouses.

2. Such properties can only be acquired through inheritance and are subject to state-specific land laws.

Also Read: Power of Attorney in India for Selling Property

Eligibility and Key Conditions

When investing in Indian real estate as a foreigner, the following eligibility conditions must be met:

• Residential Status: Only NRIs and OCIs can buy property without approval.

• Purpose of Use: Property must be for residential or commercial purposes, not agricultural or industrial use.

• Mode of Payment: Must be through normal banking channels, not in foreign currency or traveler’s cheques.

• Compliance with FEMA: All transactions must follow FEMA provisions to avoid legal issues.

• State-Specific Rules: Some states have additional regulations regarding property ownership by non-residents.

Also Read: Foreign Direct Investment in India: A Comprehensive Guide to Key Regulations

FEMA and RBI Regulations

FEMA provides the legal foundation for regulating foreign investment in Indian real estate. RBI acts as the implementing authority to ensure foreign exchange compliance.

Key points under FEMA and RBI guidelines:

1. Property transactions involving foreigners must not violate exchange control regulations.

2. RBI monitors fund inflows and outflows in property transactions to prevent misuse.

3. Violation of FEMA may lead to penalties, property seizure, or reversal of the transaction.

4. RBI periodically issues circulars specifying eligibility, permitted transactions, and repatriation rules.

For the latest circulars, investors can visit the RBI’s official website.

Documents Required to Buy Property in India (For NRIs & OCIs)

When an NRI or OCI decides to buy property, they must submit proper documentation to complete the transaction legally:

Tip: Always ensure the property has a clear title and no litigation history before signing the sale agreement.

Procedure for Buying Property in India (Step by Step)

Step 1: Property Research & Legal Verification

1. Check land title, encumbrance, and approval status.

2. Hire a property lawyer to ensure the property is litigation-free.

Step 2: Agreement for Sale

1. Draft a sale agreement that specifies property details, price, payment schedule, and terms.

2. Both parties should sign in the presence of witnesses.

Step 3: Payment through Banking Channels

1. Transfer funds through NRE/NRO/FCNR accounts.

2. Keep proof of remittance for RBI compliance.

Step 4: Execution of Sale Deed

• A registered sale deed must be executed to transfer ownership legally.

Step 5: Registration of Property

1. Visit the Sub-Registrar’s Office.

2. Pay stamp duty and registration fees as per state laws.

3. Biometric verification and document submission are mandatory.

Step 6: Mutation & Possession

1. After registration, the buyer’s name must be updated in municipal records through mutation.

2. Take possession of the property and ensure utility connections are transferred.

Tax Implications for Foreigners Buying Property in India

9Property Tax

All property owners, including NRIs and OCIs, must pay annual property tax to the municipal authority.

Capital Gains Tax

1. Short-term capital gains (if sold within 24 months): Taxed as per applicable income slab.

2. Long-term capital gains (if held for more than 24 months): Taxed at 20% with indexation benefits.

Rental Income Tax

1. Rental income from property in India is taxable under the Income-tax Act, 1961.

2. Tenants are required to deduct TDS (Tax Deducted at Source) before paying rent.

3. Double Taxation Avoidance Agreements (DTAAs) may help reduce tax burden in the investor’s home country.

Repatriation of Funds

1. Repatriation of sale proceeds is allowed for up to two residential properties.

2. Funds can only be repatriated if:

   1. The purchase was made through NRE/FCNR funds.

   2. Applicable taxes have been paid.

   3. A CA certificate (Form 15CA/CB) is submitted.

Can Foreigners Inherit Property in India?

Yes. Foreign nationals, NRIs, and OCIs can inherit property in India from a person who was a resident Indian.

Inheritance can occur through:

1. A valid will.

2. Personal succession laws (e.g., Hindu Succession Act, Muslim Law, Indian Succession Act).

However:

1. If the inherited property is agricultural land, its transfer may still be subject to state-specific land laws.

2. Selling inherited property to another foreigner may require RBI permission.

Sale of Property by Foreigners

Foreign nationals, NRIs, and OCIs can sell property in India subject to FEMA compliance.

1. Property can be sold to a resident Indian, NRI, or OCI.

2. If sold to a foreign national, RBI approval is needed.

3. Repatriation of sale proceeds must comply with tax laws and RBI guidelines.

4. Capital gains tax applies, and clearance from the Income Tax Department is required before funds are transferred abroad.

Advantages of Investing in Indian Real Estate

Strong Economic Growth

India’s stable economic growth supports rising property values and investor confidence.

High Rental Yields

Cities like Bengaluru, Hyderabad, and Pune offer steady rental demand, especially in tech hubs.

Government Reforms

• Real Estate (Regulation and Development) Act, 2016 (RERA) has improved transparency.

• Digital land record initiatives enhance ease of doing business.

Portfolio Diversification

Investing in Indian property allows global investors to diversify their portfolios in a rapidly developing market.

Challenges Faced by Foreign Investors

While opportunities are plenty, investors may face:

• Regulatory Complexity: Different states have varied land and registration laws.

• Restrictions on Land Type: Agricultural or farmhouse properties are off-limits.

• Exchange Rate Risks: Currency fluctuations can affect return on investment.

• Administrative Delays: Property registration and fund repatriation can take time.

• Legal Disputes: Title disputes or delays in possession may occur if due diligence is skipped.

Tips for Safe Investment by Foreigners

1. Hire a reputed property lawyer or legal service provider.

2. Verify land title, encumbrance, and project approvals.

3. Ensure all payments are made through legal banking channels.

4. Register the property properly and keep certified copies of all documents.

5. Stay updated on FEMA and RBI circulars.

Platforms like LegalKart can help foreign investors get property verification reports, legal consultation, and assistance in due diligence before finalizing the transaction.

Conclusion

So, can foreigners buy property in India?

• NRIs and OCIs: Yes — with relatively fewer restrictions for residential and commercial property.

• Foreign Nationals: Only in limited cases, usually requiring RBI approval.

• Agricultural Land: Not permitted for purchase by any foreign individual.

Understanding FEMA, RBI guidelines, taxation rules, and legal due diligence is crucial for a smooth investment process. With India’s property market becoming more transparent and digitally integrated, opportunities for global investors are growing.

However, careful legal compliance remains non-negotiable. By working with legal professionals, verifying property titles, and ensuring financial transparency, foreigners can safely invest in India’s thriving real estate sector.

Also Read: Supreme Court Mandates Three Years of Legal Practice for Judicial Service Eligibility: A Complete Guide

Background: Why the Ban Was Issued

Growing Security Concerns

The Supreme Court handles cases of national importance, including sensitive constitutional issues, high-profile criminal appeals, and matters that may have security implications. Unauthorized photography or videography could inadvertently expose security layouts, restricted areas, or even sensitive documents.

Rise of Social Media Trends

In recent years, there has been an increase in incidents where lawyers, interns, or visitors have taken selfies or shot reels inside the premises to post on platforms like Instagram or LinkedIn. Even seemingly harmless content can disrupt decorum or create perceptions that undermine the dignity of the court.

Official Circular from the Supreme Court

On [date of issuance], the Secretary General of the Supreme Court issued a circular explicitly prohibiting:

1. Selfies and reels inside the restricted zone.

2. Photography or video recording using cameras, tripods, selfie sticks, or even mobile phones.

3. Media interviews or live broadcasts outside designated low-security zones.

The circular emphasizes that the restriction applies not only inside the courtroom but also to lawns and corridors within the high-security area.

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Scope of the Ban: Who Is Affected

The order applies comprehensively to all categories of people entering the high-security area:

Also Read: Supreme Court to Decide: Will Law Degrees in India Become Shorter and More Affordable?

Areas Covered Under the Ban

The high-security zone includes:

1. Courtrooms and corridors leading to them.

2. Lawns within the high-security perimeter.

3. Registrar and Chamber blocks.

4. Library areas not open to the public.

The low-security zone (such as some outer lawns) is the only permissible area for media interviews, but even here, permission may be required for official shoots.

Penalties and Disciplinary Action

The circular lays out clear penalties for violations:

• Media persons: Suspension of high-security zone access for one month.

• Lawyers or interns: Reporting to Bar Associations or State Bar Councils.

• Registry staff: Strict internal measures (could include warnings, suspension, or departmental inquiry).

• Other visitors: Immediate removal and potential permanent restriction of entry.

This stern approach signals that the Supreme Court will not tolerate even minor breaches, given the sensitive nature of its work.

Legal and Ethical Justification

a. Respect for Judicial Decorum

Courts are not tourist attractions—they are venues for justice delivery. Allowing casual photography could diminish the seriousness of proceedings.

b. Protection of Sensitive Information

Photos or videos could capture confidential case documents or security arrangements, posing risks to litigants, witnesses, and the judiciary.

c. Precedent in Other Institutions

Similar bans exist in:

1. Parliament Houses (photography restricted in certain areas).

2. High-profile government offices.

3. International courts like the US Supreme Court, which prohibits cameras inside.

Impact on Different Stakeholders

Lawyers and Bar Associations

Lawyers must ensure discipline within their ranks. A casual reel could now lead to disciplinary hearings or even affect professional reputation.

Law Students and Interns

Interns are often tempted to capture their Supreme Court experience. However, violating the ban could result in academic consequences or a black mark on their career record.

Media Houses

Media professionals now have clear boundaries—interviews must happen only in the designated areas, and prior permissions may be essential.

General Visitors

For the public, this reinforces that Supreme Court visits are serious matters. Visitors should focus on the legal process, not content creation.

Previous Incidents That Prompted the Decision

Reports suggest that several recent cases involved people posting reels or videos that:

1. Showed security arrangements or lawyer-client discussions.

2. Disrupted decorum in hallways or court lawns.

3. Were used to sensationalize sensitive cases on social media.

These incidents alerted the registry and security officials, prompting the formal circular.

What Counts as a Restricted Premises Violation?

To avoid confusion, here are examples:

Allowed

1. Taking a photograph outside the Supreme Court gates or in public areas.

2. Media coverage from approved zones.

Not Allowed

1. Clicking selfies near courtroom entrances.

2. Filming a reel on the high-security lawn.

3. Recording conversations with lawyers inside corridors.

4. Using tripods or selfie sticks in any restricted area.

Security Measures and Enforcement

Security personnel at the Supreme Court are now **empowered to:

1. Stop individuals taking photos or videos.

2. Inspect devices if a breach is suspected.

3. Confiscate access passes or alert authorities.

The use of metal detectors, CCTV monitoring, and controlled entry gates will complement enforcement.

Implications for Digital Journalism

The order does not restrict press freedom but sets boundaries for maintaining decorum. Journalists must:

1. Apply for necessary permissions for in-depth coverage.

2. Restrict live updates to designated press areas.

3. Use file photos or external footage for visuals inside reports.

Public Reaction and Legal Community Response

The ban has drawn mixed reactions:

1. Supporters argue it preserves dignity and protects security.

2. Critics say it reflects an overly cautious approach in a digital era.

Bar Associations have largely welcomed the move, citing prior disruptions caused by unauthorized content. Social media users, however, have shared memes joking about the ban, highlighting its cultural resonance.

Comparison with Global Practices

United States Supreme Court

• Cameras are strictly prohibited inside. Only official sketches are allowed.

UK Supreme Court

• Allows live streaming of some proceedings but under strict supervision.

European Court of Human Rights

• Provides official media but restricts personal photography.

These examples show that India’s Supreme Court ban is consistent with global best practices.

Advice for Visitors and Practitioners

Do’s

1. Follow security personnel instructions.

2. Use designated press zones for media coverage.

3. Keep phones on silent mode inside the premises.

Don’ts

1. Do not take selfies or reels inside restricted areas.

2. Avoid publicly discussing sensitive cases near courtrooms.

3. Do not argue with security if stopped—comply respectfully.

Potential Legal Consequences of Defiance

While the circular primarily mentions administrative penalties, defiance could also invite:

1. Contempt of court proceedings under the Contempt of Courts Act, 1971 if actions are deemed disrespectful.

2. Criminal trespass charges under Section 441 of the IPC in extreme cases of breach.

This highlights the seriousness of compliance.

Broader Lessons: Respecting Institutional Boundaries

The Supreme Court’s ban is a reminder that not every space is a backdrop for content creation. It underscores:

1. Balancing freedom of expression with institutional security.

2. Understanding legal ethics—especially for lawyers and law students.

3. Maintaining professionalism in the age of social media.

Conclusion

The Supreme Court’s decision to ban selfies, reels, and casual photography inside its restricted premises is not an arbitrary rule but a necessary step to preserve the sanctity and security of India’s highest judicial institution. In an age where content creation often overshadows context, this move serves as a powerful reminder of respect for institutional boundaries.

For lawyers, interns, journalists, and the public, compliance is simple—leave the cameras and selfie sticks outside and focus on the judicial process that upholds India’s democracy. Respecting this rule is not just about avoiding penalties—it is about honoring the dignity and integrity of the Supreme Court.

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What Was the Case About?

The Public Interest Litigation (PIL) was filed by Ajit Deshpande, a law student, and a group of young advocates. They demanded that the Bar Council of Maharashtra and Goa (BCMG) should pay a monthly stipend of ₹5,000 to lawyers who:

1. Have less than three years of practice

2. Earn less than ₹1 lakh annually

Why Did They File the Petition?

The petitioners argued:

1. Many fresh law graduates face severe financial hardship, particularly after COVID-19 disrupted court proceedings.

2. Junior lawyers often work unpaid or underpaid for senior advocates during their initial years.

3. Without financial support, talented young lawyers are forced to leave the profession for better-paying careers.

They also pointed out that other states like Kerala, Tamil Nadu, Andhra Pradesh, and Jharkhand already have stipend schemes for junior lawyers.

Also Read: Supreme Court Mandates Three Years of Legal Practice for Judicial Service Eligibility: A Complete Guide

What Did the Bombay High Court Say?

The PIL was heard on June 25, 2025, by Chief Justice Alok Aradhe and Justice Sandeep Marne.

The judges agreed that:

1. The idea of providing a stipend to junior lawyers is morally right.

2. In a city like Mumbai, where living costs are high, a young advocate may even need ₹45,000/month to survive.

But they also asked critical questions:

“Is there a legal or statutory right that allows junior lawyers to demand a stipend?”

“Can the Court direct the Bar Council to pay stipends without proper legal backing?”

The Court’s Stand:

1. Good intentions aren’t enough. Courts can only issue orders if there is a clear statutory provision backing the demand.
2. Recommendations by the Bar Council of India (BCI) do not amount to binding law.

BCI Guidelines vs Legal Enforceability

The petitioners pointed to BCI guidelines recommending:

1. ₹20,000/month for junior lawyers in urban areas

2. ₹15,000/month for those in rural areas

These guidelines were issued after a Delhi High Court directive in July 2024.

However, the Bombay HC clarified:

1. BCI recommendations are advisory, not mandatory.

2. Unless there’s a law passed by Parliament or a state legislature, courts cannot enforce stipend payments.

Also Read: How to Become a Lawyer in India: A Comprehensive Guide

Bar Council of Maharashtra and Goa: No Funds

The Bar Council of Maharashtra and Goa (BCMG), represented by Advocate Uday Warunjikar, informed the Court:

1. The BCMG does not have sufficient funds to implement a stipend scheme.

2. The Maharashtra government has refused to provide financial support for the initiative.

3. A stipend scheme for all junior lawyers in Maharashtra would cost ₹155 crore per year.

4. Enrollment fees for new lawyers have been reduced from ₹15,000 to ₹600, resulting in significant revenue loss.

This highlighted the financial constraints faced by Bar Councils.

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Court’s Final Direction

The Bombay HC has adjourned the matter for two weeks, asking the petitioners to:
Present legal reasoning showing whether junior lawyers have a statutory right to demand stipends.
Demonstrate if the Bar Council is legally obliged to pay stipends.

Without clear legal backing, the Court cannot issue a mandamus (a directive forcing an authority to act).

Where Does the Law Stand on Junior Lawyer Stipends?

Under the Advocates Act, 1961:

So far, there is no legal provision compelling Bar Councils or governments to pay stipends to junior lawyers.

Lawyer’s Stipend: Comparison with Other States

Several Indian states already provide financial aid to junior advocates:

This shows that state government involvement is often crucial for running stipend schemes.

How Junior Lawyers Can Support Themselves Without Stipends

While the fight for stipends continues, here are practical tips for junior lawyers to sustain themselves:

1. Freelance Legal Work: Offer services like contract drafting, legal research, or opinion writing online.

2. Enroll on Legal Platforms: Websites like LegalKart and others connect clients with lawyers for consultations.

3. Legal Blogging & Content Writing: Share your knowledge and earn as a freelance legal writer.

4. Intern with NGOs or Legal Aid Clinics: Gain experience and modest stipends in some cases.

5. Teach Law Students: Offer tuitions for CLAT, judiciary exams, or law entrance coaching.

These strategies won’t replace a stipend but can provide some financial breathing room.

Why This Case Matters

This case raises critical questions for India’s legal ecosystem:

1. Should the legal profession support newcomers financially?

2. Can courts step in when there’s no clear law backing a demand?

3. How should Bar Councils and governments collaborate to ensure young lawyers aren’t priced out of the profession?

This isn’t just about ₹5,000 a month. It’s about making the legal profession inclusive and retaining talent.

The Way Forward

The Bombay HC has shown moral support for stipends but emphasized that laws, not emotions, govern decisions.

What Needs to Happen:

1. State governments should launch stipend schemes for junior advocates.

2. Parliament or state legislatures should pass laws mandating financial support for junior lawyers.

3. Bar Councils need increased funding through enrollment fees or government grants.

4. The legal fraternity must lobby for reforms to create a more inclusive profession.

Until then, the reality remains challenging for India’s junior lawyers.

Final Thoughts

The Bombay High Court’s observation is a wake-up call for the legal fraternity and policymakers. While stipends for junior lawyers are a noble idea, they need legal and financial backing to become a reality.

This issue is about more than money—it’s about ensuring that bright, hardworking young lawyers are not driven out of the profession due to financial stress.

The path ahead requires legislative will, government support, and collective action from the legal community.

Until then, young advocates will have to balance their passion for law with practical strategies for survival.

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Understanding the SEBI ESOP Reform: What Has Changed?

The Securities and Exchange Board of India (SEBI) has fundamentally altered how Employee Stock Ownership Plans (ESOPs) apply to startup founders — especially those designated as promoters — during and after the Initial Public Offering (IPO) process.

This reform is not just a technical rule change; it is a structural shift in how India views and supports its startup founders during their transition to public markets. Let’s break down exactly what has changed.

The Old Rule: No ESOPs for Promoters Post-IPO

Under the old SEBI framework:

1. Promoters were prohibited from receiving or exercising ESOPs after their company was listed.

2. This rule treated startup founders the same as traditional business promoters, ignoring the fact that startup founders often:

   1. Draw minimal salaries

   2. Rely on ESOPs as deferred compensation

   3. Endure heavy equity dilution over multiple fundraising rounds

3. Founders had to either restructure their equity plans or forgo ESOP benefits, just to stay compliant before filing for an IPO.

4. This created friction between regulatory compliance and entrepreneurial incentive, often discouraging startups from going public altogether.

The New Rule: Founders Can Retain ESOPs Post-Listing

In June 2025, SEBI announced a pivotal update:

Startup founders can now hold or exercise ESOPs even after the company is listed, provided certain conditions are met.

Here’s what the new rule allows:

Why the One-Year Rule?

SEBI has introduced a 12-month cooling-off period between the grant of ESOPs and the DRHP filing to:

1. Prevent last-minute ESOP allocations purely for IPO-driven gains

2. Maintain corporate governance standards

3. Ensure that the stock options reflect genuine long-term incentives and not short-term windfalls

This is a pro-investor move, ensuring founders have “skin in the game” well before the IPO.

What the Reform Does NOT Change

While this is a significant reform, some things remain the same:

1. Other employees and non-promoter executives continue to follow existing ESOP frameworks.

2. All ESOP grants, including those to founders, must still comply with:

   1. SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021

   2. Company’s internal compensation policies

   3. Board and shareholder approvals

The reform is focused and precise, aimed at resolving a specific pain point without overhauling the entire ESOP regime.

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Why This Reform Matters: Key Benefits for Startup Founders

Let’s explore the key benefits and why this change is being hailed as a game changer by India’s tech and investor communities.

1. Aligns with the Realities of Startup Building

Startup founders:

1. Draw minimal or no salaries for years.

2. Endure significant dilution through multiple funding rounds.

3. Rely heavily on ESOPs as a form of deferred compensation and long-term incentive.

Under the earlier regime, these founders were denied the right to hold ESOPs post-listing if labeled as promoters — effectively stripping them of a key financial motivator just when public listing milestones were achieved.

With the reform:
Founders can now enjoy equity-linked compensation even after IPO, recognizing the sweat equity they’ve put in for years.

2. Encourages Long-Term Thinking and Stability

Bringing a company to IPO is a massive achievement — but managing a public company requires even greater commitment.

This reform allows founders to:

1. Stay financially incentivized beyond the IPO.

2. Align their personal success with long-term company performance.

3. Avoid quick exits that could destabilize the leadership team.

Incentivized leadership = sustained innovation + better shareholder value.

3. Simplifies Cap Table Structuring Before IPO

Earlier, founders had to jump through hoops to retain ownership without violating SEBI’s promoter ESOP restriction, such as:

1. Issuing stock through third-party trusts.

2. Designing alternative compensation models (e.g., phantom stock).

3. Altering designation to avoid being classified as a "promoter."

These workaround strategies increased legal complexity and compliance risk.

Now:
Founders and their boards can plan equity structures with clarity and compliance, resulting in:

1. Transparent DRHP filings.

2. Cleaner cap tables.

3. Better investor confidence.

4. Strengthens Founder Morale and Retention

Founders often dedicate a decade or more to building their companies from scratch. Yet the psychological blow of losing ESOP rights at IPO was a demoralizing precedent in Indian markets.

SEBI’s decision restores:

1. Founder morale by preserving rewards they’ve rightfully earned.

2. A sense of emotional ownership during the critical post-listing phase.

3. Incentives to stay longer and lead stronger — which benefits public shareholders too.

5. Improves Talent Alignment Across Growth Stages

Startups transition from:

1. Early product development →

2. Growth scaling →

3. Pre-IPO preparations →

4. Listed company dynamics.

This reform allows consistent equity alignment across all these stages, particularly for founder-promoters, which:

1. Reinforces commitment.

2. Reduces leadership churn post-listing.

3. Helps boards maintain operational continuity.

This continuity is especially vital for tech startups where the founding team’s vision and leadership style are tightly integrated with company success.

6. Brings India Closer to Global Best Practices

Globally, startup founders listed on NASDAQ, LSE, or SGX routinely hold stock options post-IPO. India’s earlier stance — treating startup founders like old-school industrialists — was out of sync with international norms.

This reform:

1. Bridges that gap.

2. Sends a clear message: India is ready to support global-scale startups.

3. Makes Indian IPOs more competitive and attractive in a global funding environment.

7. Incentivizes More Startups to Go Public

For many high-growth Indian startups, the fear of losing founder incentives post-IPO acted as a deterrent to listing.

SEBI’s reform:

1. Encourages earlier IPO decisions.

2. Unlocks better exit opportunities for VCs and early investors.

3. Enhances depth and diversity in India’s public markets.

8. Promotes Transparency and Good Governance

By requiring:

1. A one-year cooling-off period between ESOP grant and DRHP filing.

2. Full disclosure of ESOPs in the DRHP.

SEBI has built in strong governance measures that:

1. Prevent last-minute opportunistic ESOP allocations.

2. Protect public market investors from valuation surprises.

3. Ensure only genuinely committed founders benefit from this rule.

9. Supports Founder Well-being and Wealth Creation

Let’s not ignore the personal toll:

1. Founders typically mortgage assets, invest savings, and take emotional and physical risks while building.

2. They endure delayed gratification as they reinvest earnings back into the business.

This reform:

1. Validates that commitment.

2. Offers a fair shot at wealth creation through equity ownership, just like other stakeholders.

It’s not just a financial benefit — it’s an acknowledgment of the founder’s journey.

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Stakeholder Reactions: Industry Voices Applaud the Move

SEBI’s ESOP reform has sent ripples of optimism through India’s startup ecosystem. From founders and venture capitalists to policy experts and equity management professionals, the response has been overwhelmingly positive.

Let’s explore what key stakeholders are saying — and why this reform is being hailed as a historic win for startup India.

Founders: Finally, Recognition of Long-Term Commitment

Startup founders have welcomed the reform with open arms, describing it as long overdue. For years, they have operated in a regulatory environment that offered little flexibility once their companies reached IPO stage. Now, with SEBI’s move:

“This is a good move — it allows promoters and founders to be incentivized for the long term.”
— Mayank Kumar, Co-founder of BorderPlus and upGrad

This statement encapsulates the relief felt by founders who have:

1. Worked on low salaries

2. Faced multiple dilutions

3. Navigated cap table complexities

4. And still pushed their ventures toward the public market

The reform means founders can now continue benefiting from the value they create, well beyond the listing event.

Investors and Venture Capitalists: Incentives Now Aligned with Execution

Venture capitalists have consistently highlighted the disconnect between public market compliance and startup operating models. SEBI’s announcement finally bridges that divide.

“Founders sacrifice a lot during the building phase... This relaxation allows them to participate further in value creation beyond the listing timeline.”
— Vinod Murali, Co-founder & Managing Partner, Alteria Capital

VCs see this as a move that:

1. Promotes continuity in leadership

2. Boosts post-IPO performance

3. Enhances investor confidence in founder-led execution

Well-aligned incentives are vital for delivering consistent returns to public shareholders — and this rule nails that alignment.

Policy Experts: A Pro-Startup Regulatory Mindset

For policy think tanks and startup advocacy forums, the reform is more than a procedural tweak. It signals a shift in India’s regulatory posture, one that finally understands and supports new-age companies.

“This is a big relief to founders of new-age companies… It will enable them to avail skin-in-the-game benefits and align their interests with other shareholders.”
— Startup Policy Forum

Experts also appreciate the cooling-off period of one year, which acts as a built-in safeguard against regulatory misuse. The combination of flexibility and control reflects a mature policy outlook.

Equity Management Professionals: Simplification with Strong Governance

Companies like Qapita, which help startups manage equity and ESOP workflows, have also weighed in.

“For startup founders, unlike traditional promoters, the starting compensation is much lower. So it incentivizes them if this is allowed… It brings necessary nuance.”
— Ravi Ravulaparthi, CEO & Co-founder, Qapita

Ravi’s insights highlight that:

1. ESOPs are compensation tools for founders, not just ownership perks.

2. The ability to retain ESOPs after listing gives founders a genuine chance to realize value in liquid markets — something they’ve historically missed out on.
    

Capital Market Experts: Enhancing India’s Global Attractiveness

Capital markets analysts are calling this a globally competitive move, especially with more Indian startups eyeing public listings in 2025 and beyond.

“SEBI now allowing founders to retain ESOPs after IPO is a positive step towards making the markets more entrepreneur-friendly.”
— Kushal Bhagia, Founder, All In Capital

He further added that founders, after 7–12 years of building with little salary and heavy dilution, deserve this financial upside. Investors too benefit from motivated leadership post-IPO, reducing the risk of post-listing disengagement.

Broader Ecosystem: Morale, Momentum, and Market Confidence

Across the board, the sentiment is one of renewed confidence:

1. Founders feel seen and supported.

2. Boards gain clarity in ESOP structuring.

3. Retail and institutional investors get aligned leadership post-listing.

Together, these reactions suggest that SEBI has struck the right balance — removing ambiguity, boosting morale, and safeguarding investor interests.

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Regulatory Perspective: SEBI’s Strategic Intent

Behind every landmark policy lies a purpose — and SEBI’s reform on ESOPs for startup founders is no exception. Far from being a one-off relaxation, this move reflects a deliberate shift in India’s capital market philosophy, especially when it comes to nurturing innovation-driven enterprises.

Let’s examine why SEBI made this move, what it reveals about the regulator’s evolving mindset, and how it fits into India’s larger economic vision.

1. Bridging the Gap Between Old-Economy Rules and New-Age Startups

India’s legacy promoter framework was built around family-run, industrial-era businesses where promoters held large stakes and drew regular salaries. These rules:

1. Restricted ESOPs for promoters

2. Assumed wealth had already been accumulated

3. Were designed to prevent insider misuse

But this framework was increasingly outdated for startups, where:

1. Founders often draw little or no salary

2. Ownership is heavily diluted across funding rounds

3. ESOPs serve as deferred and performance-based compensation

SEBI recognized this structural mismatch. The reform signifies a policy modernization — one that acknowledges how differently startups operate and removes the one-size-fits-all regulatory approach.

2. Aligning Regulation with India’s Economic Goals

India is betting big on its startup economy to drive future growth, jobs, innovation, and capital formation. The government’s Startup India and Digital India initiatives are pushing more companies toward formalization and listing.

SEBI’s ESOP reform complements this mission by:

1. Reducing listing friction for high-growth companies

2. Strengthening entrepreneurial incentives

3. Encouraging more startups to tap domestic capital markets

It’s a move aligned with India’s vision of becoming a $5 trillion economy, where startups are key contributors to both GDP and employment.

3. Promoting Ease of Doing Business and Regulatory Clarity

SEBI has been increasingly focused on making India’s public markets more accessible. Over the past few years, it has:

1. Introduced Innovators Growth Platform (IGP) for startups

2. Simplified IPO disclosure norms

3. Digitized and de-cluttered compliance frameworks

Allowing founders to retain ESOPs post-listing is consistent with this trend. It removes ambiguity, simplifies cap table planning, and sends a strong message: “India is open for entrepreneurial business — even after IPO.”

4. Encouraging Long-Term Value Creation Post-IPO

SEBI is aware that IPOs are no longer just exit points — they are launchpads for the next phase of business growth. For public shareholders, sustained founder involvement is crucial to:

1. Ensuring strategic continuity

2. Maintaining innovation velocity

3. Reducing the risk of leadership churn

By letting founders retain ESOPs after listing, SEBI ensures that they stay financially and emotionally invested, ultimately improving post-IPO governance and performance.

This is in line with global best practices in mature markets like the U.S. and U.K., where founder incentives are considered vital even after public listing.

5. Balancing Flexibility with Accountability

What sets this reform apart is how SEBI has built safeguards to prevent misuse, ensuring regulatory discipline isn’t sacrificed:

1. The 12-month cooling-off rule before DRHP filing prevents last-minute stock option grants for short-term gain.

2. Mandatory DRHP disclosures introduce transparency and protect investor interests.

3. Continued compliance with SEBI’s SBEB & SE Regulations, 2021 ensures that ESOP frameworks remain well-governed.

This shows that SEBI is not compromising on accountability — it is simply evolving to reflect the needs of a dynamic market.

6. Responding to Market Signals and Stakeholder Feedback

Over the last few years, SEBI has increasingly engaged with:

1. Startup founders and boards

2. Investor groups and VCs

3. Policy forums and think tanks

4. Equity management platforms

The ESOP reform is a direct outcome of that feedback loop. It signals that SEBI:

1. Listens to its stakeholders

2. Understands the challenges of startups

3. Is willing to act when there is alignment on long-term benefits

It’s a testament to responsive and participatory policymaking, rare in many regulatory systems.

7. Enhancing India’s Reputation as a Startup-Friendly Capital Market

By introducing this forward-thinking reform, SEBI is setting a precedent in Asia and beyond.

It positions India as:

1. A jurisdiction that rewards innovation

2. A capital market that values founders’ contributions

3. A regulatory environment that combines growth with governance

This helps attract:

1. Global venture capital

2. Foreign institutional investors (FIIs)

3. And encourages Indian startups to list domestically, instead of seeking foreign exchanges like NASDAQ

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What Are the Conditions? – A Closer Look

To ensure the rule is not misused, SEBI has included the following safeguards:

These guardrails strike the right balance between flexibility and compliance.

Impact on the IPO Ecosystem: A Catalyst for Growth

SEBI’s ESOP reform doesn’t just benefit individual founders — it transforms the startup IPO ecosystem at large. By correcting a long-standing structural flaw, the regulator has opened the door to a healthier, founder-aligned, and more dynamic public market environment in India.

Let’s examine how this reform is likely to shape the future of Indian IPOs across multiple dimensions — from startup behavior to market maturity and investor sentiment.

1. Encourages More Startups to Go Public

Historically, many Indian startups delayed or avoided IPOs altogether due to:

1. The fear of losing equity-linked incentives post-listing.

2. Uncertainty about regulatory compliance around cap table structuring.

3. Challenges aligning ESOPs with promoter status.

Now, with SEBI’s reform in place:

1. Founders no longer face a penalty for listing.

2. ESOPs can remain a key component of their compensation and motivation strategy.

3. Companies can plan their IPOs more confidently and transparently.

Outcome: Expect more high-growth startups to take the IPO route sooner, deepening India’s capital markets.

2. Streamlines Cap Table Restructuring Ahead of Listing

Earlier:

1. Startups had to redesign equity structures, create ESOP trusts, or alter shareholding to avoid conflicts with SEBI rules.

2. This added compliance costs, legal complexity, and timeline delays to the IPO journey.

Now:

1. Companies can maintain cleaner cap tables with transparent ESOP allocations to founders.

2. DRHP disclosures make the process more investor-friendly and governance-aligned.

Outcome: Smoother DRHP filings, reduced legal friction, and faster IPO preparedness.

3. Retains Founders Post-IPO: A Key Success Factor

In the global startup ecosystem, founder continuity post-listing is strongly correlated with long-term company performance. However, in India, founders previously had fewer reasons to stick around after IPOs, especially once ESOPs were restricted.

This led to:

1. Leadership churn right after listing.

2. Execution gaps during the crucial post-IPO growth phase.

With the ESOP reform:

1. Founders stay financially and emotionally invested in the company.

2. Boards and shareholders gain greater continuity and predictability.

3. The risk of value erosion from sudden exits is reduced.

Outcome: Stronger post-IPO execution, better investor confidence, and increased long-term shareholder value.

4. Builds a More Competitive and Investor-Friendly Market

Public market investors — especially retail and mutual funds — value:

1. Aligned incentives between management and shareholders

2. Transparent ownership and compensation structures

3. Strategic stability after the IPO

SEBI’s reform delivers all of the above, helping:

1. Strengthen investor faith in founder-led companies

2. Ensure that public markets are seen as viable funding avenues, not just exit paths

3. Boost market maturity by setting long-term performance as the north star

Outcome: Greater retail participation and stronger institutional interest in tech-led IPOs.

5. Boosts India’s Position as a Global IPO Destination

SEBI’s reform brings India’s ESOP policies closer to international norms followed by:

1. NASDAQ and NYSE in the U.S.

2. London Stock Exchange (AIM) in the U.K.

3. SGX in Singapore

This is particularly important as more Indian startups:

1. Explore dual listings

2. Attract global VC and PE investments

3. Aspire to scale across international markets

Now, Indian exchanges can offer:

1. Regulatory parity

2. Founder-aligned incentives

3. A credible public capital exit framework

Outcome: Fewer startups will feel the need to list abroad — strengthening domestic financial markets.

6. Supports Market Timing and IPO Pipeline Momentum

In 2024:

1. 13 startups went public, raising over ₹29,000 crore.

2. 25+ more were exploring listing, though some paused due to market volatility.

With SEBI’s reform:

1. The economic case for going public strengthens.

2. Even if timing is tricky, founders can now plan better — knowing their incentives remain intact.

3. Delayed IPOs can resume without reworking ESOP grants or cap tables.

Outcome: A more resilient IPO pipeline, especially as macro conditions improve in late 2025 and beyond.

7. Reinforces Good Governance with Founder Incentivization

The reform ensures:

1. Disclosure of ESOPs in DRHP filings

2. A minimum 12-month grant window before filing

3. Continued compliance with SBEB & SE Regulations

This sends a clear message:

India’s capital markets are pro-innovation, but not at the cost of transparency.

Outcome: A regulatory environment that combines flexibility, fairness, and accountability.

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Case Study: Why This Matters — Hypothetical Example

Imagine a founder of a startup like “TechNova,” who:

1. Has built the company for 10 years

2. Draws only ₹25,000/month as salary

3. Owns just 5% due to multiple fundraising rounds

4. Is planning to list on the NSE

Under old rules, if TechNova goes public:

1. The founder would be disqualified from ESOPs

2. They’d receive no further equity participation

Under the new rule:

1. The founder retains ESOPs granted a year before DRHP

2. They can monetize post-IPO performance

3. They stay motivated to lead the company into its next decade

This is a paradigm shift for startup founders.

Comparison with Global Markets

Let’s put things into a global context:

With this move, India aligns itself with global best practices, making it a more attractive destination for high-growth tech startups.

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ESOP Buyback Trends Signal Maturity

One of the clearest signs of a maturing startup ecosystem is how companies treat employee stock options — not just as a perk, but as a real, liquid reward for value creation. In India, the ESOP landscape has evolved significantly in recent years, and the latest SEBI reform complements that trajectory.

The increasing frequency and sophistication of ESOP buyback programs are proof that startups are no longer waiting until IPOs to deliver returns to employees and founders. Instead, they are using structured liquidity events to reward, retain, and reinvest in their teams.

Buybacks Are Becoming Commonplace

According to data from Qapita (a leading equity management platform):

1. In 2024, 26 startups announced ESOP buyback programs — up from 19 in 2023.

2. While the total payout value dropped to $252 million, this was a correction from the $825 million recorded in 2023 (skewed heavily by Flipkart’s mega buyback).

3. The trend clearly indicates increased adoption of buybacks as part of employee compensation and retention strategy.

This marks a shift from:

1. Early-stage mindset (where ESOPs are viewed as distant future gains)

   To:

2. Growth-stage and pre-IPO mindset (where ESOPs are actively monetized as a business tool)

What Do These Buybacks Represent?

ESOP buybacks are no longer rare events. They reflect:

1. Maturity of Private Markets
   Startups are creating internal liquidity cycles before reaching IPO, reducing employee turnover and enhancing morale.

2. Investor Support
   Buybacks are often backed by secondary funding rounds or internal reserves, showing strong investor faith in the company’s fundamentals.

3. Governance Readiness
   Conducting structured buybacks requires clear equity records, pricing policies, and board oversight — all signs of governance discipline.

4. Talent Strategy
   Companies use buybacks to:

   1. Retain top performers

   2. Recruit experienced leadership

   3. Show commitment to long-term employee wealth creation

Linking Buyback Momentum with SEBI’s ESOP Reform

SEBI’s decision to allow promoters (founders) to hold ESOPs post-IPO fits seamlessly into this rising culture of structured equity management.

Here's how they align:

This dual momentum — internal (buybacks) and external (regulatory reform) — suggests that India’s equity markets are entering a new era of sophistication.

Industry Voices on ESOP Buyback Culture

“Buybacks are no longer vanity events. They’re part of a broader founder and talent retention strategy. With SEBI’s rule, even founders now get to share in this liquidity cycle post-listing.”
— Equity Advisor, VC-backed Startup

“We’ve seen employees value ESOPs more once they see real money from buybacks. Founder participation adds credibility to the whole system.”
— HR Head, Late-Stage Fintech Startup

These statements underscore the psychological and structural impact of treating ESOPs as real rewards, not empty promises.

The New Equity Lifecycle in Indian Startups

Traditionally, equity in Indian startups followed this basic path:

Grant ESOPs → Wait till IPO → Cash Out (if lucky)

Now, the flow is evolving into:

Grant ESOPs → Periodic Buybacks → Continued Value Post-IPO (via SEBI’s reform)

This modern lifecycle:

1. Reduces dependency on IPOs as the sole liquidity event

2. Enhances predictability for employees and founders

3. Strengthens trust in stock-based compensation

Case in Point: The 2023–24 Buyback Momentum

Some notable buyback programs in 2023–24 included:

1. Razorpay, Swiggy, and Zerodha offered multi-million-dollar ESOP buybacks

2. Lenskart and Groww extended participation to even junior-level employees

3. A mix of secondary and funded buybacks showed flexible strategies

This proves that startups are ready to:

1. Share the wealth

2. Play the long game

3. Prepare for public markets with maturity

And with SEBI’s post-IPO ESOP allowance, founders can now lead by example — staying invested long after the ticker tape settles.

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Challenges and Criticisms: Is It All Good News?

While SEBI’s ESOP reform has been widely applauded as a long-overdue and founder-friendly move, no policy is without its caveats, challenges, or unintended consequences.

Let’s explore the limitations, criticisms, and grey areas that industry observers, legal experts, and founders have pointed out.

1. Not Applicable Retroactively

Issue:
One of the biggest limitations of the reform is that it is not retroactive.

1. Founders who received ESOP grants within 12 months prior to filing the Draft Red Herring Prospectus (DRHP) will not be eligible to retain or exercise those options post-IPO.

2. This affects startups already in the late stages of IPO planning in 2024–2025, who may have granted ESOPs without anticipating this rule.

Impact:
Founders close to IPO filing are now stuck — either having to:

1. Wait longer to meet the 12-month requirement, or

2. Forego their ESOPs altogether

Criticism:
Stakeholders argue that a one-time grandfathering provision for existing companies could have softened this impact.

2. The One-Year Cooling-Off Period: Practical or Painful?

Issue:
While the 12-month holding period before DRHP filing ensures the rule isn't misused, some founders argue it may be too restrictive.

1. Startups operate in rapidly changing markets.

2. IPO timelines often shift due to economic or geopolitical conditions.

What if:

1. ESOPs were granted 11 months ago, but IPO plans had to accelerate?

2. Market conditions forced a quicker DRHP filing?

Impact:
The rigid timeline may force some founders to choose between:

1. Postponing IPOs (risking market timing), or

2. Losing ESOP benefits

Criticism:
Some suggest a sliding scale or tiered approach to eligibility instead of a fixed one-year rule.

3. Limited to ‘Promoter’ Designation — What About Co-Founders and CXOs?

Issue:
The reform applies specifically to founders designated as “promoters”. But in many modern startups:

1. The founding team includes multiple people, not all of whom are classified as promoters.

2. Key CXOs (e.g., CTOs, CFOs) who join early often receive significant ESOPs.

Impact:
These individuals still face the same post-IPO ESOP restrictions as before — potentially leading to inequity within leadership teams.

Criticism:
A more nuanced classification — such as “early management equity holders” — may be needed in the future.

4. Potential for Misinterpretation and Ambiguity

Issue:
Despite its good intentions, the reform introduces new grey areas, such as:

1. How to define "grant" — is it the date of board approval, vesting, or acceptance by the founder?

2. What if an ESOP plan was revised or re-priced close to IPO?

3. Will DRHP disclosures be uniformly enforced by merchant bankers?

Impact:
This can lead to compliance risks or legal confusion, particularly in companies without robust equity management systems.

Criticism:
SEBI may need to issue implementation guidelines or FAQs to eliminate ambiguity and reduce litigation risk.

5. Possibility of ESOP Misuse or Window Dressing

Issue:
There’s a risk — however small — that some companies may:

1. Use strategically timed ESOP grants to promoters under the guise of performance incentives.

2. Dress up the DRHP disclosures to make such grants appear aligned with long-term value, even if they’re not.

Impact:
Such actions could:

1. Undermine investor trust

2. Attract regulatory scrutiny

3. Harm the startup ecosystem’s credibility

Criticism:
Stronger auditing, board oversight, and penalty mechanisms are necessary to ensure the rule is not gamed.

6. Potential Market Perception Risk

Issue:
While many investors support founder retention, some public market analysts and retail investors may view the reform skeptically.

1. There’s a risk of misinterpretation that founders are rewarding themselves excessively.

2. ESOP disclosures in DRHPs could become public relations flashpoints during IPO marketing.

Impact:
Companies will need to manage:

1. Clear investor communication

2. Transparent disclosures

3. Possibly even media narratives around founder compensation

Criticism:
Investor education and better storytelling around ESOPs will be essential to ensure positive market sentiment.

7. Reform Doesn’t Address Deeper Structural Issues

Issue:
Some stakeholders argue that while the reform is welcome, it still doesn’t fix:

1. High taxation on ESOPs at exercise

2. Lack of secondary markets for ESOP liquidity pre-IPO

3. Ambiguities around buyback pricing and valuation

Impact:
Unless paired with tax reforms and liquidity mechanisms, ESOPs will remain sub-optimal as compensation tools, especially for early-stage employees.

Criticism:
A more holistic ESOP reform package may be needed — including coordination with CBDT and Ministry of Corporate Affairs.

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Conclusion: A Policy That Recognizes Founders as Builders

SEBI’s ESOP reform is more than a rule change — it’s a recognition of the sweat, time, and sacrifice that startup founders pour into their ventures.

By enabling founders to continue participating in equity gains post-IPO, India is finally saying: we support our entrepreneurs not just in their struggle to build, but in their success too.

This reform:

1. Brings fairness to the capital markets

2. Aligns founders’ incentives with long-term company growth

3. And puts India on a global footing in startup-friendly regulations

It is, in every sense of the word, a game changer.