Simulating indirect lighting effects has been a challenging topic in many real-time rendering and design applications. This paper presents a novel method, based on precomputed radiance transfer, for rendering physically based, multi-bounce indirect lighting in real-time. Our key idea is to represent both the direct lighting and precomputed diffuse indirect transfer using a spectral mesh basis set derived from an arbitrary scene model. The complete spectral basis set can approximate a spatially varying function to any degree of accuracy. For indirect lighting, we show that only 60-100 sparse basis coefficients suffice to achieve high accuracy, due to the low-frequency nature of indirect illumination. This reduces the run-time computation of per-vertex diffuse indirect lighting to simple inner products of two sparse vectors: one representing the dynamic direct lighting, and the other representing the precomputed direct to indirect transfer. The key advantage using this approach is that we are not restricted to parameterized models or any particular mesh topology. Our method simulates multiple diffuse interreflections while at the same time permitting dynamically changing surface albedos. In addition, we approximate the final bounce of glossy interreflection using a standard BRDF SH projection. Finally, we demonstrate high-quality indirect lighting effects rendered at 15-30 fps with dynamically changing lighting and materials.