Apartment construction is booming as the wealthy rush to invest in rental housing as a way to reduce inheritance tax and banks hand out easy mortgages, but concerns are mounting that excessive supply paired with a shrinking population could soon lead to the bursting of the bubble.

New starts on apartments and other rental housing in 2016 rose 10.5 percent from a year earlier to over 418,500 units, government data show. The figure took a dive after the 2008 global financial crisis but has risen for the past five years.

The government of Prime Minister Shinzo Abe in 2015 expanded the scope of the inheritance tax, effectively raising taxes for wealthier families. As a result, many are investing in apartments to take advantage of a discount that applies to land with rental housing on it.

Banks have been only too happy to accommodate them with mortgages. Loans for apartment buildings generally carry a higher rate than those for homes, making them good business for lenders, especially smaller regional ones, that have seen the Bank of Japan’s negative interest rate policy eat into their profits.

New loans for real estate investment in 2016 jumped 15.2 percent from a year earlier to a record ¥12.28 trillion, according to data compiled by the BOJ.

The rapid expansion of housing supply has left landlords in areas other than Tokyo and Osaka struggling to fill units. A realtor at a major company warned that the market is “in dangerous territory where landlords are struggling to pay the bills.”

That reality has hit hard one landowner in his 60s who has two properties near Mito, Ibaraki Prefecture. His late father built apartments on farmland owned by the family to receive the inheritance tax discount.

A building contractor suggested the move, promising a 30-year contract to sublet the properties. When the contractor could not find enough tenants, it cut the contract short on one of the properties, leaving the landowner ¥150 million in debt. He worries the contractor may do the same with the second property.

He was recently approached by a separate firm and a bank with a similar offer to construct new apartment buildings. “It’s clear the (housing) bubble will burst at some point, but these companies and banks don’t tell you that,” he said.

“There are cases where companies threaten to cut their contracts short and landlords are forced to reduce rent,” warned Akira Sakao, a lawyer who specializes in real estate.

Kazuyuki Fujii of research firm TAS Corp. said, “It’s owners, not banks or companies, that always get the short end of the stick.”

Regulatory bodies including the Financial Services Agency are looking to tighten oversight of mortgage lenders. “Banks are approving mortgages without thoroughly going over the risk of vacancy and changes in rent” with landowners, said a senior FSA official.

The BOJ also plans to target problematic real estate loans during on-site inspections of banks this fiscal year. “Some banks have a higher ratio of real estate finance and have lax screening processes,” a senior BOJ official said.