India’s listed office REITs are entering a new phase of stable, low-risk compounding returns, according to Morgan Stanley. Backed by strong leasing momentum, easing interest rates, and sustained demand from global capability centres (GCCs), the brokerage says FY25 marked a clear inflection point for the sector, with distribution per unit (DPU) growth accelerating to around 10% year-on-year — the first such uptrend since listing, NDTV Profit reported.

Morgan Stanley expects DPU to compound at roughly 10% annually over the next three years, supported by higher occupancies, new leasable area additions, and the full transmission of rate cuts.

India’s office market fundamentals remain resilient, the report said. Leasing volumes have grown at a 33% CAGR over the past two years, while rents have expanded at a 7% CAGR, led by structurally strong GCC demand.

According to NASSCOM, the number of GCCs in India is expected to rise from about 1,760 in FY25 to nearly 2,400 by FY30, with market size expanding at a similar pace. This, Morgan Stanley noted, should keep demand for quality office assets strong.

Lower interest rates add another tailwind. The Reserve Bank of India has cut rates by a cumulative 125 basis points since January 2025, which the brokerage expects to flow through to REIT distributions by FY27.

Against this backdrop, Morgan Stanley upgraded Mindspace Business Parks REIT to overweight and maintained its overweight stance on Embassy Office Parks REIT, while retaining an equal-weight rating on Brookfield India Real Estate Trust.