This, he said, might primarily impact the banking sector as the situation can bring about long-term debts.
"I am just voicing my concern. I see all over the city, a lot of buildings up for sale or rent. Obviously, these buildings are unoccupied and not earning money. If the developer does not earn from what he has constructed, then he will not be able to repay the bank.
"We have seen this happen in Japan, Hong Kong and Dubai recently. When you overbuild and cannot earn an income, then you cannot repay the bank which as a result can go bankrupt.
"So we have to be careful," he told a press conference after launching the International Conference on Sustainable Mobility 2010 here on Wednesday, Dec 1.
He was speaking in relation to a recent posting on his blog where he opined that there was a possibility of the bubble bursting from the overbuilding in Kuala Lumpur.
On the 100-storey Menara Warisan PNB, Dr Mahathir said the project should continue as planned if there are genuine buyers interested in the tower and not mere speculators.
"If there are buyers, it is all right. But my worry is that, they are speculators, buying in the hope, that the property will appreciate.
On Tuesday, Prime Minister Datuk Seri Najib Razak said construction of the tower would go ahead if it is commercially viable and contributes towards the larger economic development within the particular area and provides business opportunities.
Meanwhile, speaking about the conference, Dr Mahathir pointed out it is a perfect platform for researchers and experts in the field to discuss the importance of sustainable mobility and green technologies.
He also highlighted that the time has come for all car maufacturers to realise and utilise the full potential of green technology to the industry.
The three-day conference which began on Wednesday, is organised by the SAE International Malaysia Section jointly with Universiti Teknologi Malaysia (UTM).
It is aimed at providing opportunities for participants to exchange ideas, findings, promote knowledge sharing and cooperate in the field of sustainable mobility.
The conference features the Proton Saga electric model, developed in only 11 months by Proton with the cooperation of UTM.
Also present at the event was Minister of Energy, Green Technology and Water Datuk Seri Peter Chin Fah Kui. — Bernama