Need help simplifying this project as arduino is abit overkill for this application. I am abit noob at electronics and wondering if there are any IC's or modules that will simplify or make this project more efficient. Thanks.

Description
IR-1 and IR-2 are IR obstacle avoidance sensor modules.
Relay-1 and Relay-2 interconnect to form a latching relay.

Operation:
If finger swipes past IR-1 THEN IR-2, Turn ON relay (keep in NO position)
If finger swipes past IR-2 THEN IR-1, TURN OFF relay (return to NC position)
Pretty much same as a normal light switch.

 

I'm not sure about the output logic of IR-1 and IR-2, but it seems that the CD4013 can do the job.

 

What I thought as this way --

If the output of IR is Low to High then using CD4013:

IR → CR Differential circuit with 1N4148 → 5V logic level N MOSFET or you want to add a relay, you also could choose the P MOSFET and choose the different output of CD4013(D, CK all connected to Ground).

If the output of IR is High to Low then choose 74HC74.

You can choose C=0.1uF, R=47K to try and according to the time that the finger passes through IR-1 to IR-2, and adjust the values of CR.

There is a little strange in the circuit diagram of relays, are you drawn the wrong connection or what?

 

Need help simplifying this project as arduino is abit overkill for this application

I don't think it's overkill by any means which Arduino model are you using? I'm thinking use a Nano.
Do not need two relays to latch if using a micro.