India's office real estate investment trusts are entering what Morgan Stanley calls a new phase of low-risk, compounding returns, driven by strong leasing momentum, easing interest rates, and sustained demand from global capability centres. FY25 marked a clear inflection point for listed office REITs, with distribution per unit growth of around 10.00% year-on-year — the first such acceleration since their listing.

Market Fundamentals Drive REIT Performance

Morgan Stanley expects distribution per unit to compound at roughly 10.00% 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, with leasing volumes growing at a 33.00% compound annual growth rate over the past two years, while rents have expanded at a 7.00% CAGR.

The structural strength comes from robust 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 growth trajectory should maintain strong demand for quality office assets.

Interest Rate Environment Provides Additional Support

Lower interest rates add another significant tailwind for REITs. The Reserve Bank of India has cut rates by a cumulative 125 basis points since January 2025, which Morgan Stanley expects to flow through to REIT distributions by FY27. This monetary easing creates a more favorable environment for real estate investment trusts.

Morgan Stanley's Investment Recommendations

Against this positive backdrop, Morgan Stanley has made strategic rating changes across the REIT sector:

Mindspace Emerges as Top Pick

Mindspace Business Parks REIT emerged as the top pick due to several compelling factors:

• Low leverage profile providing financial flexibility
• Strong sponsor-led acquisition pipeline
• Data centre exposure offering growth diversification
• High mark-to-market rental upside potential

Embassy Benefits from Strategic Positioning

Embassy Office Parks REIT benefits from dominant exposure to Bengaluru and GCC tenants, which contributed nearly two-thirds of its recent gross rentals. This positioning aligns well with the structural growth in global capability centres.

Brookfield Faces Different Growth Dynamics

Brookfield's growth strategy is more acquisition-led, which could potentially raise leverage levels while offering a less tax-efficient distribution profile compared to its peers.

Challenges Remain Despite Positive Outlook

Despite improving fundamentals, Morgan Stanley identified constrained institutional participation as a lingering challenge for the REIT sector. Regulatory changes, including Securities and Exchange Board of India reclassifying REITs as equities, should help over time, but near-term institutional inflows remain limited. This regulatory evolution represents a key factor for long-term sector development and broader market participation.

Mindspace Business Parks REIT has successfully completed quarterly interest payments totaling ₹1,380.85 crores on its Non-Convertible Debentures (NCDs) for the quarter ended December 31, 2025. The payments were executed on December 29, 2025, two days ahead of the due date of December 31, 2025.

NCD Portfolio Overview

The interest payments covered 13 NCD series with a combined issue size of ₹7,490 crores. The portfolio includes both regular NCDs and Green Bonds, demonstrating the REIT's commitment to sustainable financing.

Major Payment Components

The largest individual payment was made for Series 13, amounting to ₹148.58 crores on a ₹550 crore issue size with half-yearly frequency. Series 10, with the highest issue size of ₹650 crores among quarterly series, generated an interest payment of ₹130.09 crores.

Recent Series Performance

The newer NCD series (14-16) showed varied interest payment patterns, with Series 16 having the largest issue size of ₹1,200 crores but a relatively lower quarterly interest payment of ₹52.63 crores, indicating competitive interest rates.

Payment Execution Details

All payments were processed with a record date of December 16, 2025, and executed on December 29, 2025. The company confirmed that all interest obligations due for the quarter ended December 31, 2025, have been fulfilled with no unpaid obligations remaining. Most series maintained their previous payment frequency, with the majority following quarterly payment schedules.

Compliance and Transparency

The payment certification was filed under Regulation 57 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. K Raheja Corp Investment Managers Private Limited, acting as the Manager to Mindspace Business Parks REIT, ensured timely compliance with all regulatory requirements and maintained transparency in debt servicing obligations.