Real estate stocks hit hard by IT sector's AI worries, Nifty Realty index down 3%; ‘Best is behind us’, says expert

Real Estate

• Nifty Realty index falls 3 percent as all stocks trade in the red
• IT sector weakness sparks concerns for real estate demand
• SignatureGlobal India leads losses, down 5.4 percent

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Real estate stocks came under further pressure in late trading on Tuesday, tracking broader weakness in equity markets as mounting uncertainty around the IT sector weighed on sentiment. The Nifty Realty index extended the day's fall to 3 percent, with all 10 constituents trading in the red, amid concerns that sustained stress in information technology stocks could spill over into real estate demand and valuations.

The sell-off in realty shares comes alongside a sharp decline in IT stocks, which have been hit by fears of artificial intelligence-led disruption. Anthropic has claimed that its AI tools could sharply reduce the cost and complexity of modernising legacy software systems -- an area critical to traditional IT services firms. The IT sector has been the worst-performing pocket in recent sessions, heightening risk aversion across linked sectors.

Within the Nifty Realty index, SignatureGlobal India stock was the top loser, down 5.4 percent at Rs 931.6. Prestige Estate shares fell 4.7 percent to Rs 1,419.7, while Godrej Properties slipped 3.7 percent to Rs 1,761.8. Lodha Group declined 3.8 percent to Rs 1,032.6, while Sobha shares also lost 3.8 percent to Rs 1,455.8.

Other stocks in the index also traded lower. Anant Raj dropped 1.5 percent, Brigade Enterprises fell 2.6 percent, and index heavyweight DLF was down 2.5 percent at Rs 610.6. The Phoenix Mills and Oberoi Realty also traded 1-2 percent lower.

As for the Nifty Realty itself, the index has lost 4.5 percent in one week and is down 9.2 percent so far this year.

• Also read | Nifty IT index crashes over 4% as Anthropic’s AI claims fuel disruption fears; TCS, Infosys among top losers

Market participants pointed to concerns that prolonged weakness in IT stocks -- driven by fears of structural changes to the sector’s business model -- could eventually weigh on commercial real estate demand and urban housing sentiment, given the sector’s historical linkage with technology-driven employment and office absorption.

Commenting on the sector, Murtuza Arsiwalla of Kotak Institutional Equities said on CNBC-TV18 that the Street is increasingly cautious on real estate amid uncertainties surrounding the IT sector. He said the best phase for the real estate sector may already be behind it, although individual companies could still perform well.

Arsiwalla added that realty stocks are currently pricing in almost no near-term growth, reflecting subdued expectations. He said that while REITs may continue to deliver reasonable returns, these are likely to be lower than those seen over the past two years. According to him, value opportunities at this stage lie largely in the residential segment and in select contrarian plays rather than a broad-based sector re-rating.

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