The demand for co-working 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. As organisations look to resume business, redesigning and restructuring of existing office spaces is posing yet another challenge. This is where co-working spaces come into picture. These shared spaces can respond to design changes required post-Covid quicker and more efficiently than traditional office spaces.
However, to propel the growth of this segment, the upcoming union budget must announce certain measures. These include:
- Recognition under the special scheme: Co-working has changed the very concept of the workplace today. For better growth of the sector, the government should recognise it under special schemes like REITs and offer some tax benefits.
- Reduction in TDS rate: Currently, the TDS rate applicable on co-working services is 10% as these companies provide renting of both movables and immovables. As the shared space industry grows, a lower TDS rate will give the sector a major boost. It will enable companies to provide real estate solutions to clients at economical rates, which will further help in better flow of working capital.
- Financial support to start-ups: Financial support to start-ups would create greater demand for co-working spaces. As several entrepreneurs who opt for these shared spaces are early and mid- start-ups, the government should reduce the present rate of registration and stamp duty to register documents. This will give a fillip to both start-ups as well as co-working spaces.
- Reduction in GST: There is also a need to reduce the GST rate to the lowest slab for upcoming start-ups as it will make a significant impact on their finances. Currently, co-working spaces charge a GST of 18% to all clients, which is huge for newcomers.
Apart from these, an 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 the increased outflow of cash co-working firms is currently experiencing. Co-working firms also hope that input tax credit under GST will be extended to developers so that it could be passed on to companies who lease out space, and thereby reduce their overall costs.
- Better funding: Institutional capital is crucial to co-working spaces that are dependent on funds for multiple factors. The government must also allow banks to give loans to co-working firms against the cash flow of co-working players. Further, to increase funding in the sector, the government should provide investment benefits to investors of these co-working spaces.
This article is contributed by Manas Mehrotra, Founder, 315Work Avenue.
(The views expressed here are solely those of the author and do not necessarily represent or reflect the views of RoofandFloor)
