Some Reforms Needed To Incentivize Coworking Sector

Author: Mr. Manas Mehrotra, Founder, 315Work Avenue, a leading coworking firm

The demand for coworking office spaces has seen tremendous growth in the last few years and the post lockdown scenario is bringing in a wave of new opportunities for the co-working players. Medium-to-long-term fundamentals remain sound as companies seek out alternative options to reduce costs and capital expenditure. Now, more than ever, flexibility is crucial and hence co-working spaces, with their natural flexibility and inherent readiness to add value are best positioned to adapt and redefine the future of work and workspace.

Companies will strive to be agile and prefer to build more flexibility into their real estate portfolios. As companies look to resume business, redesigning and restructuring of existing real estate will pose yet another challenge, however coworking spaces will be able to respond to design changes required post-COVID-19 quicker and more efficiently than traditional office spaces.

Mr-Manas-Mehrotra-Founder-315Work-Avenue
Manas Mehrotra, Founder:315 Work-Avenue

However, we have some important expectations from the upcoming Budget 2021 to further propel the growth in the sector.

Co-working has changed the very concept of the workplace today and the market scenario of the real estate industry. As coworking is playing a vital role in the economic growth of the country, the Government should recognize it under special schemes like REIT and provide tax benefits to handhold the industry for better growth.

Financial support to start-ups would also create greater demand for coworking spaces. As several entrepreneurs who opt for coworking solutions are early and mid-startups, the government could look at reducing the present rate of registration charges and stamp duty to register documents at registrar offices as high rates additionally burden them. This will give a fillip to both start-ups and coworking spaces. Presently, the rate of TDS applicable on coworking services is 10% as coworking companies provide renting of both movables and immovables.

As the industry is going competitive, it will be good if the rate of TDS on coworking services is reduced. It will enable us to provide real estate solutions to clients at economical rates and will also help in better flow of working capital.

As remote working has taken root in the context of the pandemic and corporates have been making a beeline to coworking spaces to cut costs and capital expenditure, hence support to coworking spaces in this context would be a fillip to their growth and overall economy.

There is also need to reduce GST to the lowest slab for upcoming startups as it will make a significant impact on their budget. Currently, coworking spaces charge a GST of 18% to all clients and this is a big impact to startups. Hence, it can be reduced drastically.

Apart from these, input tax credit under GST is also an important issue that concerns the sector. The government should enable co-working firms to claim input credits on work contract and construction services supplied as detailed under GST provisions. This would check increased outflow of cash coworking firms are currently experiencing.

Coworking firms are also hoping that input tax credit under GST be extended to developers so that it could be passed on to companies who lease out space and thereby reduce their overall costs.

Institutional capital is crucial to coworking spaces which are dependent on funds for multiple factors and we expect advancement in this direction. The government must also allow banks to give loans to coworking firms against the cash flow of coworking players.

Also, to increase funding in coworking sector, the government should provide investment benefits to investors of these coworking spaces. Further, in order to expand from the metro cities to the tier II and tier III markets, the sector is also looking forward to an added infrastructural push from the Government and a single window clearance system would help quicker setting up of coworking spaces.

The coworking sector, which is now the new mantra for small and large-scale enterprises all across the country is further expecting improvement in the ease of doing business.

Author: Mr. Manas Mehrotra, Founder, 315Work Avenue, a leading coworking firm

Read on for more on coworking segment.

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