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Bengaluru's Real Estate Market Faces a Potential Course Correction: AI and Economic Shifts at Play

Bengaluru’s real estate market, which has long been a safe bet for investors due to the city’s booming tech industry, might be heading for a correction. With increasing layoffs in the tech sector and the rapid advancement of AI, concerns are rising that property prices could see a downturn in the near future.

📉 Rising Layoffs and AI Disruption Impacting Real Estate

Bengaluru’s property demand has always been closely linked to the growth of the IT sector. However, with companies increasingly adopting Generative AI (Gen AI) and other automation technologies, the traditional link between tech growth and real estate demand is weakening.

⚠️ Growing Concerns Among Tech Workers

A recent Reddit user warned that mass layoffs in the tech industry could lead to higher home loan defaults, causing property prices to dip. “Those who have invested heavily in real estate might face a rude shock soon,” the user commented, hinting that Bengaluru’s real estate landscape could look very different in the next five years due to AI advancements.

🧠 Shift to AI Reduces Workforce Demand

Several users pointed to a hiring slowdown in core tech functions. One tech professional mentioned that companies have stopped hiring for frontend, backend, and data analyst roles, focusing heavily on AI adoption instead. This shift has led to fears that fewer tech workers could mean reduced demand for residential properties.

📊 Real Estate Trends Reflecting These Concerns

📉 Correction in Rental Prices

Rental prices in prime neighbourhoods like Koramangala and Indiranagar have witnessed a correction, with monthly rents dropping by ₹5,000 to ₹10,000 in some cases. This comes after a sharp 20–40% rental hike during 2022–2023.

📈 Rising Demand in Whitefield and North Bengaluru

On the other hand, areas such as Whitefield and North Bengaluru continue to see strong demand, with rents rising by 20–25% over the past two years. The affordability and proximity to tech hubs have kept these areas attractive to renters and buyers alike.

🏡 Residential Sales Witness a Slowdown

📉 Decline in Sales in Key Areas

Residential sales momentum appears to be slowing down in various parts of Bengaluru. East Bengaluru recorded an 18% decline in sales during Q3 2024, while North Bengaluru saw a 6% dip.

🏗️ Increase in Housing Inventory

Despite this decline, new housing launches have increased by 7% year-on-year, leading to higher inventory. This surplus is contributing to price stabilisation in multiple pockets of the city.

📈 Peripheral Areas Continue to Outperform

🌟 Gunjur Sees Massive Price Appreciation

While the core areas are witnessing corrections, peripheral locations like Gunjur have outperformed, with property prices appreciating by up to 69% over the past six years. Improved connectivity and the introduction of larger residential projects have fueled this growth.

💰 Shifting Investor Sentiment

📉 Reduced Demand from NRIs and Rising Property Prices

Investor sentiment is gradually shifting, with declining demand from Non-Resident Indians (NRIs) and rising property prices creating uncertainty. Economic volatility is prompting some investors to step back, fearing that the market’s rapid growth may no longer be sustainable.

💭 Speculative Buying Concerns

Among Reddit users, there’s growing concern about speculative overbuying in recent years. One user commented, “The market is behaving as if there’s endless demand. That’s no longer true,” reflecting a sentiment that a correction is long overdue.

🤖 Is AI Really the Primary Cause? Experts Weigh In

Not everyone agrees that AI is the primary driver of this shift. A Redditor, identifying as an AI professional with over a decade of experience, argued that the impact of AI is being overstated.

🧩 Other Economic Factors at Play

The expert pointed out that AI is likely to affect only 10% or less of the workforce in the next 24 months. According to them, the layoffs happening now are part of a larger economic cycle shift rather than being solely driven by AI advancements.

🔄 Bengaluru’s Ability to Adapt and Evolve

🏙️ Reskilling and Moving Toward Sophistication

Despite these concerns, Bengaluru is known for its adaptability. As the tech landscape evolves, the city’s workforce is expected to refine its skills and take on more sophisticated tasks.

🌟 Bengaluru is Restructuring for the Future

“Bengaluru has always restructured and adapted as a city. This time is no different,” remarked the AI professional, highlighting that while a correction may be underway, Bengaluru’s resilience and innovation will continue to shape its future.

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