The co-working space trend in India is accelerating rapidly. However, the year 2020 proved challenging for this sector, as the coronavirus pandemic brought growth to a near standstill.
According to a report by Knight Frank, the share of the co-working sector in new charters plummeted from 7% in the first half of 2019 to just 2.9% in the same period of 2020. In addition to this decline in share, there was a continuous downturn in transactions during the initial six months of 2020.
With ‘work from home’ becoming the prevailing standard due to the pandemic, the commercial real estate and office spaces took a considerable hit, which included co-working spaces that nearly vanished at the onset of COVID-19. Nevertheless, as conditions improve, businesses are beginning to explore flexible work arrangements for their staff. Undoubtedly, the future looks promising for co-working spaces in India, and the trend is projected to flourish in the coming years.
Related Article:- What Real Estate Expects from Budget 2021?
Having emerged from challenging times, the sector has certain anticipations from the government regarding the upcoming Union Budget 2021. A crucial request is recognition within the realm of real estate.
What Does Amit Ramani Say About the Co-Working Sector?
Amit Ramani, Founder & CEO of Awfis, shared insights saying, "Getting infrastructural status and benefits to the co-working space sector will help to ease access to institutional lending." This would standardize the confirmation process and lower borrowing costs for developers. Currently, co-working spaces occupy a significant portion of India’s commercial real estate landscape, comprising approximately 6.8 million square feet of real estate.
Institutional Capital Needs
Just like other sectors, the co-working industry requires financial support from the government. To facilitate global expansion, particularly into Tier 2 and Tier 3 markets, an increase in accessible funding and loans for the sector is crucial. The government should permit banks to approve loans to co-working businesses based on their cash flow. Furthermore, providing exemptions for investors would enhance funding prospects.
GST Relief Needed
Similar to other facets of real estate, the co-working sector levies an 18% GST on its clients, predominantly new businesses, startups, and small enterprises. A reduction in the GST slab could alleviate their financial burden and subsequently boost demand for co-working options. Ramani elaborated, stating that currently, co-working firms are unable to claim input tax credits on construction services and work contracts as outlined by GST provisions. Therefore, addressing these obstacles is essential to improve cash flow and mitigate financial struggles.
Conclusion
The co-working sector is vital to the economic advancement of the nation. The government ought to recognize its significance within special programs such as REIT and offer tax incentives aimed at enhancing the industry's condition.