### 7. Trends and measures of the real estate industry

## (1) The condition of the real estate industry

The real estate industry is an important industry in Japan, the number of companies of which making up 10.7% of the total number of corporations and the sales of which account for 2.5% of the total sales of the country.

In the apartment market for metropolitan areas, the inventory for apartments had been over 10,000 for 14 consecutive months until January 2009, but fell below 7,000 in the autumn of 2009 and the success rate of transactions has been increasing. Although there is some indication of these changes, the real estate market at large remains in severe condition.

Furthermore, the market for securitization of real estate had been declining since 2007; however, there was an upturn of the Tokyo Stock Exchange REIT Index in the early spring of 2009.

## (2) Proper Administration of the Building Lots and Buildings Transaction Business Law

In order to protect consumer rights related to real estate transactions and to facilitate the distribution, we are working for a proper administration of the “Building Lots and Buildings Transaction Business Law” (referred to as “the Law”).

MLIT and prefectural governments have been cooperating with the related parties and have been making an effort to prevent complaints and disputes. Moreover, a grave administrative disposition has been imposed on those business operators who violate the Law. In FY 2008, 382 cases (176 for license revocation, 86 for business suspension and 120 for instruction) were subject to administrative dispositions.

In addition, according to the “The Act for Execution of Defects Warranty Liability under the Housing Quality Assurance Act” enforced on 1 $ ^{st} $ October 2009, real estate transaction operators are obliged to carry out financial assurance measures (by deposit or insurance) and to report to the administrative office when delivering the newly built house. MLIT is currently developing the measures for proper administration of the act.

In addition, the “Act on Prevention of the Transfer of Criminal Proceeds” was enacted to legislate against the transfer of illegally acquired money and to ensure the accurate implementation of the Convention for the Suppression of the Financing of Terrorism. According to the act, real estate transaction operators are obligated to confirm customer’s identity and report any suspicious transactions. In cooperation with industrial groups, measures for accurate actions towards the mentioned act are being pushed forward.

## (3) Securing appropriate management of the apartments by condominium management business operators

In response to the increase in apartment stocks, “Act on Advancement of Proper Condominium Management,” implements the registration system of condominium management business operators and in business regulation to ensure appropriate management. In addition, condominium management business operators are subject to on-site audit to improve compliance with the law and to prevent illegal conducts.

## (4) Revitalization of the real estate market

## 1 ) Current condition of the real estate market

According to the System of National Accounts, the total amount of assets of the real estate market in our country as of the end of 2008 was around 2,300 trillion yen, including real estates owned by corporations, individuals, the public sectors of the national/local governments. The accumulated amount of real estate securitized by Japan-REITs (Real Estate Investment Corporation established under the Act Concerning the Investment Trust and Investment Corporation), real estate specified joint enterprises established under the Real Estate Specified Joint Enterprises Act and special purpose companies was around 42 trillion yen at the end of FY 2007 and around 45 trillion yen at the end of FY 2008. Concerning the yearly achievement of securitization of real estate that had been expanding, a maximum of around 8.9 trillion yen was recorded in FY 2007, but it declined considerably to around 3.1 trillion yen in FY 2008.

Japan-REITs are contributing greatly to the urban development of our country by enhancing the value of real estate with its property acquisition and the renovation for earthquake resistance and so forth utilizing its abundant funds. As of the end of March 2010, 38 Investment Corporations were listed and approximately 9.72 million investment units, which amount to around 2.9514 trillion yen, were outstanding. Compared with a period from April to December of the previous year, the number of properties acquired by Japan-REITs has decreased by 67%. However, one of the Japan-REITs carried out a public offering on October 2009 for the first time in the past 15 months, and the move toward property acquisition has been increasing in line with the successive public offerings. Moreover, the Tokyo Stock Exchange REIT Index, which has been declining after 2007 (the lowest price was 704.46 as of 28 $ ^{th} $ October 2008), is on track for recovery and was 948.90 at the end of March 2010.