Commercial Real Estate Budget Wishlist: Lowering TDS on Coworking to Boost MSME & Startups Cash Flow

“India’s commercial real estate landscape is undergoing a structural shift, driven by rapid business expansion, a thriving startup ecosystem, and the widespread adoption of hybrid work models. Flexible workspaces and managed offices have moved from being an alternative real estate format to becoming core productivity infrastructure for startups, SMEs, and even large enterprises. As we approach the Union Budget, there is strong expectation that policy measures will evolve to reflect this reality.

Demand for flexible office spaces is growing steadily alongside India’s push for entrepreneurship, MSME growth, and ease of doing business. Government initiatives supporting startups, digital enterprises, and small businesses directly translate into higher demand for cost-efficient, plug-and-play workspaces. However, to fully unlock the sector’s potential, targeted fiscal and regulatory support is essential.

One of the most immediate and impactful reforms the industry is looking for is a reduction in the Tax Deducted at Source (TDS) on coworking memberships. Currently, a 10% TDS on membership fees creates unnecessary cash-flow pressure for both operators and occupiers, particularly startups and early-stage companies that operate on tight working capital cycles. Reducing TDS to around 3% would significantly ease liquidity without materially impacting government revenues, while making flexible offices more accessible and financially viable at scale.

Another critical area is the cost of digital and technology infrastructure, which forms the backbone of modern coworking and managed office environments. Today’s flex offices are no longer limited to desks and cabins—they rely heavily on servers, high-speed networking equipment, video conferencing systems, studio setups, and advanced security infrastructure. High customs duties on imported equipment substantially inflate setup costs, compress margins, and slow expansion. A temporary reduction or elimination of customs duties on such essential digital infrastructure would provide immediate relief and accelerate capacity creation across the sector.

Importantly, this approach would complement—not contradict—India’s long-term ‘Make in India’ vision. While domestic manufacturing scales up, reducing duties in the interim would prevent inflated infrastructure costs from becoming a bottleneck for the very industries driving economic growth. Flexible workspaces, in many ways, act as shared infrastructure that enables thousands of businesses to operate efficiently with lower capital expenditure.

Access to institutional finance is another area where policy intervention can make a meaningful difference. Despite stable cash flows and high occupancy levels, flexible workspace operators often face challenges in accessing structured credit due to legacy perceptions of real estate risk. Recognising managed offices and coworking spaces as formal commercial infrastructure—especially those catering to MSMEs—can help unlock funding, improve capital efficiency, and encourage organised sector growth.

Finally, continued government investment in urban infrastructure, metro connectivity, and emerging business districts will further strengthen demand for flexible offices, particularly in Tier-2 cities and new commercial corridors. Decentralised growth not only reduces pressure on Tier-1 cities but also enables job creation closer to home, aligning economic expansion with quality-of-life improvements.

Overall, the industry is looking for a pragmatic and forward-looking Budget—one that recognises flexible workspaces and managed offices as enablers of entrepreneurship, employment, and productivity. With calibrated tax reforms, rationalised duties, improved access to finance, and sustained infrastructure spending, the Union Budget can play a decisive role in shaping a more resilient, inclusive, and future-ready workspace ecosystem for India.”

Opinion and Views expressed by Mr.  Ajay Singhal -CEO at Nukleus Office Solutions Limited