Co-Working Sector Wants Recognition Within Realty Sector
As companies look to realign in the post pandemic era with flexible work options for their employees, India's co-working spaces have a chance at rebuilding a bright future again. However, according to a Knight Frank report, the share of the co-working sector in new leasing declined from 7% in H1 2019 to 3% in H1 2020. Transactions in the sector fell massively in the first six months of 2020. And to turn the tides in their favour, the sector also has a list of demands from the government with the upcoming budget 2021. At the top of their list of requirements is their need to be recognised within the real estate sector. As co-working is playing a vital role in the economic growth of the country, the Government should recognise it under special schemes like real estate investment trust (REIT) and provide tax benefits to handhold the industry for better growth. In India, co-working spaces account for 6.9 million square feet, taking up a significant portion of India’s commercial real estate. Co-working should be provided with infrastructure status. This will ensure easier access to institutional credit, simplify the approval process, and help in reducing developer’s cost of borrowing, as per Coworking companies. The government must also allow banks to give loans to co-working firms against the cash flow of co-working players. Also, to increase funding in the co-working sector, the government should provide investment benefits to investors of these co-working spaces, is another bold demand. . As offices have discovered the success of remote working, many startups and businesses are looking to move away from the leased model. They are instead looking at flexible options along with work from home. According to a report by JLL, office absorption in India reduced by 40% in 2020. And here’s where co-working players believe they fit in well. However, for better reach across the country, the sector needs support. Currently, co-working spaces charge GST of 18% to all their clients, which are mostly start-ups and small businesses. GST reduction to the lowest slab for upcoming start-ups would significantly impact their budget, which would help co-working spaces retain them as long-term clients. Currently, co-working firms cannot claim input credits on work contracts and construction services, as detailed under GST provisions. Easing this hurdle would help to increase the outflow of cash and prevent financial difficulties. Input tax credit under GST can be extended to developers who can pass it on to companies taking up seats and thereby reducing their overall costs, say coworking operators.