Incubex NestaVera
Manas Mehrotra, chairman of Incubex NestaVera, explains how coworking players are driving the demand for commercial real estate significantly and are likely to become the largest occupier of commercial real estate in key areas
How promising has this business model been in India?
Coworking is a capex intensive model and it is likely that new models will emerge that will focus on reducing the upfront capital investments. The investments pay over a period of time but most of the serious coworking players are operationally viable in the first six months of starting operations. The model is yet to see one full cycle and increasing competition is putting pressure on pricing and margins. Having said that, we are already EBITDA positive and generating positive returns. The additional capital will aid us in expanding our footprint and we plan to touch one million square feet in the next 18 months. We are also targeting INR 100 crore top-line in FY 2019-20 and look to establish ourselves as a key player in the Indian shared workspace market.
There are some other challenges too — such as availability of grade-A properties, increasing competition leading to pricing pressures, capex reduction and operational efficiency. Collaborative firms are also expecting that the government will curb or altogether eliminate angel tax. This would enable firms to lease more spaces for startups, enterprises, MSMEs and entrepreneurs. Angel tax, many believe, would destroy the startup edifice and indirectly coworking spaces as startups would desist from leasing such spaces.
How are coworking spaces affecting the corporate economy?
Corporates are increasingly open to looking at coworking as a viable option to office infrastructure requirements. It provides them quick access to a workspace at short notice, saves them from long tenure commitment, helps avoid upfront capex investment and takes away operational challenges. Coworking spaces are attracting businesses and growing in demand. In the overall corporate economy, coworking spaces have seen a rise in demand, especially among startups, which are potentially the enterprises of tomorrow. Well-funded and established startups, which no longer fit the definition of a startup, are all looking at coworking as their primary option for infrastructural requirements. Global consulting firms and MNCs looking to set up base in India are also looking at coworking and dedicated/serviced office option as their preferred option. Quick growth requirements (short notice, short term infrastructural requirement) of established corporate are also being increasingly serviced by coworking players.
Where will we see Incubex NestaVera next?
Pune and Chennai are on the plan. We can expand to tier II and tier-III cities as and when infrastructure and demand grows in these cities. There is good talent available in these cities too and there is vast scope to have a presence.