Bengaluru real estate stocks fall up to 3% amid mounting concerns around AI-led disruption in IT sector: Here's why

Real estate stocks fall up to 3% amid mounting concerns around AI-led disruption in IT sector

• Nifty Realty fell 1.45 percent as real estate stocks dropped amid AI concerns
• IT layoffs linked to AI fears may reduce housing demand in urban luxury segments
• Experts say AI is boosting productivity but not eliminating office space demand

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The shares of real estate companies dropped in trade on February 12, accompanying their IT peers amid mounting worries of AI leading to some disruption.

The fall in the real estate stocks pushed the Nifty Realty down 1.45 percent to 842.35. It is among the top sectoral losers on the markets today, after Nifty IT which is down around 5 percent to a ten-month low level.

DLF shares fell more than 3 percent, while Anant Raj shares fell nearly 3 percent. Well-known Bengaluru-based real estate developer Brigade Enterprises and Macrotech Developers (Lodha) shares fell more than 1 percent each.

Sobha, Prestige Estates and Godrej Properties were down around 2 percent each, while Oberoi Realty and Phoenix Mills shares closed in the red with marginal losses.

Why is AI spooking investors?

US job growth unexpectedly increased in January and the unemployment rate fell to 4.3 percent. These signs of labor market stability could give the Federal Reserve room to keep interest rates unchanged for some time while policymakers monitor inflation.

However, the sharp increase in payrolls was seen in the health sector. According to economists quoted by Reuters, job openings and other indicators pointed to a tepid labor market, adding that job growth remained concentrated in the healthcare and social services industries, which accounted for nearly all the rise in employment.

Earlier last week, the IT stocks had seen significant decline amid concerns that artificial intelligence can intensify competition after Anthropic's launch of a legal AI tool for its Claude AI chatbot.

The correction in IT stocks shows that the market is worried as many investors believe AI is now ready to replace engineers, especially in India’s IT services sector, said Darshan Rathod, COO, MULTYFI. “In my view, this reaction is more emotional than rational,” he added.

Pranav Koomar, Founder and CEO of PlusCash, also said that the sharp weakness seen in the IT stocks today is more of a sentiment correction rather than fundamental weakness. The fears of advanced AI platforms potentially leading to a compression of traditional services revenue models have seen widespread selling, especially in the large caps, he said.

Why are real estate stocks falling today?

In case AI indeed replaces human engineers in the IT sector, this will lead to mass layoffs which in turn can impact housing demand in key markets. Earlier this year, when IT behemoth Tata Consultancy Services (TCS) announced layoffs, real estate stocks sharply declined.

IT layoffs are likely to be the major reason for the low demand in the luxury segment of urban centers like Bangalore and Hyderabad as they will be discouraging the high-income buyers, said Shashank Gupta, Director, RPS Group.

He added that mid-to-premium housing sales, which have already dropped 15 percent year-on-year, will continue to be affected negatively as the professionals will not be willing to upgrade, opting instead to rent amid such job uncertainties.

Keshav Mangla, GM Business Development at Forteasia Realty, cited Anarock data to explain that financial tech layoffs of more than 1 lakh since 2024 have already resulted in a 12 percent drop in the demand for Tier-1 cities, thus resulting in developers' difficulties in managing cash flows and having to sell off their inventory.

"The stock market does not seem to be giving enough attention to the AI threat; the tools for generative AI are expected to take away 20-25% of the coding jobs which can bring down the HNI investments that are responsible for 30% of luxury property launches," Mangla said.

The continuous IT layoffs, which are expected to reach 2,00,000 by FY27, are a double-edged sword for real estate stocks, said Anurag Goel, Director, Goel Ganga Developments. He explained that this was because the IT layoffs will cause a further reduction in purchasing power in the markets relying mostly on IT where 35 percent of home loans are taken out.

"The lowest ever prices for Brigade and Sobha indicate the investors' fears about the prolonged sales stagnation, as the number of launches in Q3 2025 has declined by 18%. The stock market is taking into account the AI risks only to a certain extent since companies like Infosys that are hyperscalers are moving towards automating and thus, displacing the mid-level talent and consequently, the demand for flats costing Rs 10 lakh-Rs 30 lakh is being affected," Goel said.

Is there a silver lining?

While headlines around IT layoffs and AI-led efficiency gains have raised concerns, the market is already discounting a slowdown in incremental office demand rather than a collapse, said Harshal Dasani, Business Head, INVasset PMS.

"AI is more a productivity lever than a demand destroyer at this stage. It may change how space is used, but it does not eliminate the need for physical offices, especially in collaborative and client-facing roles," Dasani explained.

He added that residential demand remains supported by stable employment outside pure tech, improving balance sheets, and low speculative supply.

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