Bengaluru Real Estate Stocks Tumble Amid AI-Driven IT Layoffs

The shares of real estate companies in Bengaluru took a hit on February 12, mirroring the decline in IT stocks due to mounting worries about AI-led disruptions. The Nifty Realty index dropped 1.2% to 844.50 by 12 pm, making it one of the top sectoral losers on the market, following closely behind the Nifty IT, which fell around 5% to a four-month low.

Anant Raj and DLF shares fell more than 2% each, while Brigade Enterprises and Sobha saw their shares drop over 1.5% each. Prestige Estates and Godrej Properties were down over 1%, and Oberoi Realty and Macrotech Developers (Lodha) also experienced marginal losses.

Why is AI Spooking Investors?

US job growth unexpectedly increased in January, with the unemployment rate falling to 4.3%. These signs of labor market stability could allow the Federal Reserve to keep interest rates unchanged for some time while monitoring inflation. However, the job growth was primarily in the healthcare sector, which does not directly impact the IT or real estate sectors.

Earlier last week, IT stocks saw a significant decline due to concerns that artificial intelligence could intensify competition, especially after Anthropic's launch of a legal AI tool for its Claude AI chatbot. The correction in IT stocks indicates that the market is worried, as many investors believe AI is now ready to replace engineers, particularly in India’s IT services sector. Darshan Rathod, COO of MULTYFI, noted that this reaction is more emotional than rational.

Pranav Koomar, Founder and CEO of PlusCash, also stated that the sharp weakness in IT stocks is more of a sentiment correction rather than a fundamental issue. The fear of advanced AI platforms potentially compressing traditional services revenue models has led to widespread selling, especially in large-cap companies.

Why are Real Estate Stocks Falling Today?

If AI indeed replaces human engineers in the IT sector, it could lead to mass layoffs, which in turn could impact housing demand in key markets. Earlier this year, when IT giant Tata Consultancy Services (TCS) announced layoffs, real estate stocks fell sharply.

Shashank Gupta, Director of RPS Group, noted that IT layoffs are likely to significantly reduce demand in the luxury segment of urban centers like Bangalore and Hyderabad. Mid-to-premium housing sales have already dropped 15% year-on-year, and professionals are likely to opt for renting rather than upgrading their homes amid job uncertainties.

Keshav Mangla, GM Business Development at Forteasia Realty, cited Anarock data showing that financial tech layoffs of more than 1 lakh since 2024 have resulted in a 12% drop in demand for Tier-1 cities. This has made it difficult for developers to manage cash flows and sell off their inventory. Mangla added that the stock market may not be fully accounting for the AI threat, as generative AI tools could take away 20-25% of coding jobs, reducing high-net-worth individual (HNI) investments responsible for 30% of luxury property launches.

Anurag Goel, Director of Goel Ganga Developments, highlighted that continuous IT layoffs, expected to reach 2,00,000 by FY27, pose a significant risk to real estate stocks. IT layoffs will further reduce purchasing power in markets heavily reliant on the IT sector, where 35% of home loans are taken out. The lowest-ever prices for Brigade and Sobha indicate investor fears about prolonged sales stagnation, with Q3 2025 launches declining by 18%.

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 collapse. Harshal Dasani, Business Head of INVasset PMS, explained that AI is more of a productivity lever than a demand destroyer at this stage. 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 pure tech, improving balance sheets, and low speculative supply. While the future is uncertain, the real estate sector is adapting to the new realities brought about by AI and technological advancements.