Meiwa Estate Company Limited

The real estate market is susceptible to economic conditions, interest rate levels, and supply-demand balance, and a deterioration in market conditions may directly affect the sales prices and sales pace of the Group. In particular, since the condominium sales business involves inventory risk, there is a risk that earnings could decline significantly when market conditions worsen. The Group addresses this by formulating procurement and sales plans while closely monitoring market trends.

Since the real estate development business requires substantial borrowings, a rise in interest rates increases funding costs and may reduce profitability. In addition, a rise in housing loan interest rates may dampen end users' purchasing intent, adversely affecting condominium sales. The Group seeks to mitigate this impact by implementing financial strategies that take interest rate trends into account.

Rising land acquisition prices and increases in construction material and labor costs lead to higher development costs, posing a risk of deteriorating profitability. In particular, the recent labor shortage in the construction industry and persistently high material prices are factors that are changing the assumptions underlying business plans. The Group addresses this through appropriate site selection and thorough cost management.

In the event of a natural disaster such as an earthquake or typhoon, there is a risk that physical damage may occur to real estate owned or under development by the Group, causing business activities to be suspended or delayed. In addition, deterioration in market conditions and a decline in customers' purchasing intent due to a disaster may affect sales plans. The Group addresses this through appropriate insurance coverage and the establishment of a business continuity plan (BCP).

The real estate business is conducted under numerous laws and regulations, including the Building Standards Act, the City Planning Act, and the Building Lots and Buildings Transaction Business Act, and tightening of regulations or changes in the tax system may affect business costs and business schemes. There is also a risk that a reduction or abolition of tax incentives related to housing acquisition could lead to a decline in demand. The Group maintains a legal compliance framework and continuously monitors regulatory trends.

Since the real estate development business requires large-scale fund procurement, there is a risk that changes in financial institutions' lending stance or disruptions in credit markets could make it impossible to raise necessary funds in a timely manner and on appropriate terms. If fund procurement becomes difficult, the Group may be forced to delay or scale back development plans. The Group strives to secure a stable funding base by maintaining relationships with multiple financial institutions.

In the course of conducting its business, the Group holds a large amount of confidential information, including customers' personal information, and there is a risk that a cyberattack or internal misconduct could result in an information leak, leading to a loss of social trust and liability for damages. The Group is also continually required to respond to related laws and regulations such as the Act on the Protection of Personal Information. The Group addresses this by strengthening its information security framework and thoroughly educating employees.

In the condominium sales market, there are numerous competitors, including major developers, and intensifying competition poses a risk of declining sales prices and prolonged sales periods. In particular, if there is oversupply in the greater Tokyo metropolitan area or if it becomes difficult to differentiate properties from competing offerings, profitability may decline. The Group seeks to maintain its competitiveness by improving property quality and strengthening its brand power.

Personnel with specialized knowledge and experience are essential for carrying out the real estate development business, and there is a risk that it may become difficult to secure and retain excellent personnel due to the declining working population resulting from the falling birthrate and aging population, as well as intensifying competition for talent. A shortage of personnel could lead to a decline in business execution capability and delays in development plans. The Group addresses this by strengthening its recruitment activities and enhancing its personnel development programs.

There is a risk that litigation or claims may be brought by customers or business partners in connection with the sale, management, or construction of real estate. If claims for damages arise due to warranty liability or quality issues, this could lead not only to financial losses but also to a decline in corporate image. The Group strives to reduce litigation risk through thorough quality control and appropriate contract management.