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Budget 2024 expectations: Tax cuts, integration with SEZs among top demands of co-working and co-living players
With just a few days to go for FM Nirmala Sitharaman's budget 2024 announcement, co-working and co-living firms demand integration with SEZs, input tax credit
As India Inc awaits the presentation of Union Budget 2024 on July 23, stakeholders across sectors are drawing up their wish lists for finance minister Nirmala Sitharaman. Stakeholders of the emerging co-working and co-living segments have demanded inclusion in smart city planning, indirect tax rationalization and integration with special economic zones, among others.
The flexible office space segment has demonstrated a consistent upward trajectory following the Covid-19 pandemic, gaining increasing market share within the larger commercial real estate sector. Large enterprises too have shifted gears in favour of this category amid adoption of a hybrid work culture. Meanwhile, the organised co-living segment, albeit at a nascent stage, is giving the rental housing market a run for its money.
What are flexible office providers seeking from Budget 2024?
Stakeholders across the segment stated that lowering the Goods and Services Tax rate for small-scale co-working clients would make the segment more accessible to startups and small businesses, expand the industry's reach, and ultimately bring in revenue.
“This reduction can act as a catalyst for the expansion of co-working spaces across tier II and tier III cities, whilst fostering entrepreneurship and innovation in these regions, which is the need of the hour,” said Suvrat Jain, founder and CEO of Onward workspaces.
“We expect the budget would enable co-working firms to claim input credit on work contract and construction services supplied so that it is passed on to companies who lease out space for co-working and thereby reduce their overall costs,” said Manas Mehrotra, founder, 315Work Avenue, adding lower/concessional rate of TDS will also improve working capital of co-working firms.
Furthermore, there has been an increasing demand to reduce the tax rates applicable for co-working spaces too as a majority of the receivables from their clients are towards services. “The expectation is to bring co-working spaces into the 2% TDS slab, as in the case of services, from the present 10%,” said Anshuman Magazine, Chairman and CEO - India, South-East Asia, Middle East and Africa, CBRE.
Integrate co-working spaces with SEZs
Many across the real estate sector see a major opportunity in integrating co-working spaces with special economic zones (SEZs). “This would create a win-win scenario, combining the co-working sector's agility and focus on innovation with the SEZs' beneficial regulations for businesses,” said Sumit Lakhani, Deputy CEO, Awfis Space Solutions.
He added that the move could attract a wave of domestic and international companies, fuelling economic growth and fostering dynamic business hubs in India’s tier II cities.
According to a report by property consultancy Colliers, India’s flexible office space stock is expected to reach 80 million square feet (msf) by 2026 to account for 9-10% of the total Grade A office stock of the country.
In the April-June period of 2024, the segment accounted for a 14.6% share in the overall office leasing activity recorded across the top-7 markets in India, per JLL.
This is what the co-living segment expects from Budget 2024
Nikhil Sikri, co-founder and CEO of Zolostays, made a case for greater formalization of this sector, bringing both organized and unorganized players under the ambit of GST, direct taxes and comprehensive regulations.
“At present, only organized entities are subjected to these laws, resulting in significant cost disparities and diminishing the competitive intensity for compliant businesses,” he protested.
Also Read: 53rd GST Council meeting: Co-living firms welcome proposal to exempt GST on accommodation services
Other items on the list, in line with the larger real estate sector’s demands, include a single-window clearance for regulatory approvals, financial incentives and green credits for eco-friendly buildings and easier access to funding, among others.
