Nearly 40 percent of A-share real estate developers, who have issued earnings statements for the first half of the year, project losses.

Observers said that limited financing channels have led to a bottleneck for small and medium real estate developers.

Consolidation in the sector seems a step closer, reported the Beijing-based Securities Times.

Conglomerates such as Vanke, Poly Real Estate Group and China Merchants Property Development, are expanding fast, particularly China Merchants Property Development, which has grown by a staggering 105 to 113 percent from last year.

On the other hand, 20 small and medium firms of the 52 companies that have revealed their earnings are not fairing so well.

For instance, AVIC Real Estate forecast losses for the first time of between 28 million to 36 million yuan ($4.5 million to $5.8 million).

Some real estate firms are exiting from the industry.

The industry is about to go through a major reshuffling to eliminate companies suffering capital shortages, observers said.