Bengaluru Real Estate Stocks Plummet Amid AI-Driven Layoff Fears
The shares of real estate companies in Bengaluru dropped significantly on February 12, mirroring the decline in IT stocks due to mounting worries about AI-led disruption. The Nifty Realty index fell 1.2% to 844.50 by midday, making it one of the top sectoral losers in the market, following the Nifty IT, which saw a 5% drop to a four-month low.
Anant Raj and DLF shares each fell more than 2%, while Brigade Enterprises and Sobha saw their shares decline by over 1.5% each. Prestige Estates and Godrej Properties were down over 1%, and Oberoi Realty and Macrotech Developers (Lodha) also traded in the red with minor losses.
Why is AI Spooking Investors?
US job growth unexpectedly increased in January, with the unemployment rate falling to 4.3%. This stability in the labor market could allow the Federal Reserve to keep interest rates unchanged while monitoring inflation. However, economists noted that job growth was primarily in the healthcare sector, indicating a tepid labor market overall.
Earlier last week, IT stocks experienced a significant decline due to concerns that AI could intensify competition, particularly after Anthropic's launch of a legal AI tool for its Claude chatbot. Darshan Rathod, COO of MULTYFI, commented that the market's reaction to AI is more emotional than rational. Pranav Koomar, Founder and CEO of PlusCash, echoed this sentiment, noting that the sharp weakness in IT stocks is more of a sentiment correction rather than a fundamental issue.
Why are Real Estate Stocks Falling Today?
The potential for AI to replace human engineers in the IT sector could lead to mass layoffs, impacting housing demand in key markets. For instance, when Tata Consultancy Services (TCS) announced layoffs earlier this year, real estate stocks sharply declined.
Shashank Gupta, Director of RPS Group, explained that IT layoffs are likely to reduce demand in the luxury housing segment in urban centers like Bangalore and Hyderabad, as they will deter high-income buyers. Mid-to-premium housing sales, which have already dropped 15% year-on-year, are expected to continue to decline as professionals become hesitant to upgrade their homes amid job uncertainties.
Keshav Mangla, GM Business Development at Forteasia Realty, cited Anarock data showing that financial tech layoffs of more than 100,000 since 2024 have led to a 12% drop in demand for Tier-1 cities. This has resulted in difficulties for developers in managing cash flows and selling off inventory. Mangla further noted that AI tools are expected to eliminate 20-25% of coding jobs, affecting high-net-worth individual (HNI) investments that account for 30% of luxury property launches.
Anurag Goel, Director of Goel Ganga Developments, pointed out that IT layoffs, expected to reach 200,000 by FY27, are a double-edged sword for real estate stocks. The layoffs will reduce purchasing power in markets heavily reliant on IT, where 35% of home loans are taken out. The lowest-ever prices for Brigade and Sobha reflect investors' fears about prolonged sales stagnation, with a 18% decline in launches in Q3 2025.
Is There a Silver Lining?
Despite the headlines about IT layoffs and AI-led efficiency gains, the market is already discounting a slowdown in incremental office demand rather than a complete collapse, according to Harshal Dasani, Business Head of INVasset PMS. AI is currently more of a productivity tool than a demand destroyer. It may change how office space is used but does not eliminate the need for physical offices, especially in collaborative and client-facing roles.
Dasani added that residential demand remains supported by stable employment outside the tech sector, improving balance sheets, and low speculative supply.
