With the increasing demand on the back of its cost-effective pricing alternatives as well as flexible work environment, the coworking industry has been gaining momentum. Notably, enterprises and corporations are redirecting their attention to coworking spaces, in line with the adoption of the hybrid work model to address their organizational requirements.
The commercial real estate industry is undergoing a surge in demand, propelled by the economic upturn and the gradual return of employees to traditional office spaces. This heightened demand can be attributed to inventive office space concepts, business-friendly initiatives, and the offering of top-notch amenities to tenants.
Given the current trend of hybrid work arrangements, the coworking industry holds specific expectations regarding Goods and Services Tax (GST) and taxation. Anticipating favourable measures in the upcoming interim Union Budget, the sector hopes for initiatives that could enhance its growth trajectory.
The coworking industry is advocating for several key measures, including a reduced GST rate for small-scale clients. This is expected to not only attract small startups to join the industry but also enhance revenue collection for the government.
The salary upper limit of ₹25,000 could be increased to ₹40,000, and the timeline from 3 years to 5 years to allow startups/coworking entities to benefit from Section 80JJAA, considering these industries generate a significant volume of employment.
Furthermore, there is a call for clarification on GST regarding the reimbursement of electricity charges. As utility charges constitute a substantial expense for coworking entities, obtaining GST exemption on such expenditures would contribute to improved cash-flow management.
It anticipates that the Union Budget will facilitate coworking firms to claim input tax credits on work contracts and construction services. This, in turn, would be passed on to companies leasing space for coworking, helping them reduce overall costs.
Stamp and registration duties are typically high, and since both landlord and client agreements are subject to these charges, either a concession in stamp duty rates or allowing twice the duty paid as expenditure under income tax would encourage even small agreements to get registered.
In addition to these expectations, the coworking industry is looking forward to a lower or concessional rate of TDS and a continued extension of the tax holiday for startups in the upcoming Budget 2024.
India remains the fastest-growing flex office market in the APAC region and is poised to represent one-fifth of the office market by 2030.
The anticipated growth for coworking spaces is approximately 15-20% over the next two to three years, with the potential for even higher growth if macro fundamentals remain stable. The formulation of hybrid working rules and policies, aligning business goals with workforce needs, is expected to be a top priority for occupiers.
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To expedite the establishment of coworking spaces in non-metro cities, a significant boost to infrastructure and the implementation of a single-window clearance system are crucial.
Looking ahead, there is optimism that the government will address regulatory concerns and incentivize the opening of more coworking firms through a combination of financial and non-financial measures, thereby fostering faster economic growth.
In the context of the rising trend of hybrid work models, the Indian coworking industry is hopeful for favourable tax reforms. Anticipating lower GST rates, clearer guidelines on electricity charges, and tax incentives in the Union Budget 2024-2025, stakeholders envision sustained expansion, contributing significantly to India’s evolving commercial real estate landscape.
