MITSUI Fudosan Co, Japan's largest property developer by revenue, said yesterday that first-half profit fell 13 percent as the company's inventory of unsold condominiums rose.

Net income dropped to 32.1 billion yen (US$326 million) for the six months ended September 30 from 36.8 billion yen a year earlier, the company said in a statement to the Tokyo Stock Exchange. Sales increased by 3.4 percent to 614.5 billion yen.

"The condominium market has very much crashed," Satoru Aoyama, a director at Fitch Ratings, told Bloomberg News.

The Tokyo-based company cut its full-year profit forecast to 90 billion yen and reduced its sales target to 1.5 trillion yen. Mitsui Fudosan previously had forecast 95 billion yen in profit on sales of 1.53 trillion yen for the full year.

Japan's slowing economy and the credit crisis that has tightened lending have damped demand for commercial and residential property. More downward revisions by Japanese developers may follow as both residential sales and office leasing markets deteriorate.

"Property is a highly cyclical business," Aoyama said. "The leasing business always lags behind economic conditions. Next year may be when we start to see weakness in rents."

Operating profit from leasing rose 14 percent to 51.9 billion yen in the period. Vacancies for Tokyo office and commercial buildings in MF's portfolio rose to 1.6 percent as of the end of September from 1.4 percent in June.