Haikou, the capital of South China's island province of Hainan, may become the first city to loosen restrictions on home ownership that were brought in to cool the housing market.

The move is being mulled, in part, because tax revenue from the sale of residential property has taken a nosedive in recent months.

Dai Kaiquan, director of the market administration division at Haikou's housing and urban-rural development bureau, said on Tuesday that the property market geared toward the tourism sector is likely to be opened back up to all buyers. Dai said the rest of the residential housing market probably will continue to be limited to local homebuyers.

Dai said Haikou is not planning to completely end restrictions on home purchases but intends to manage the property market in different ways and treat projects differently according to whether they are geared toward tourism or are residential projects.

He pointed out that the real estate market on the island is unlike the sector in other cities because Hainan hopes to build itself into an international tourism destination.

Ji Wenlin, the mayor of Haikou, said at a conference on April 20 that the city will make full use of preferential policies afforded by the State Council and take steps to keep house prices low without stifling the volume of home purchases.

On Feb 28, Haikou government released home purchase restrictions that stipulated that residents with a local hukou, or permanent residence permit, were not allowed to buy more than two homes. Potential buyers with hukou from other parts of the country were, at that time, prohibited from buying homes in the city.

An official from the Haikou housing and urban-rural development bureau, who refused to be named, told Economic Observer News on Monday that home purchase restrictions will still apply in the downtown area but noted that high-end commercial residences would be available for all buyers, whether they have a Haikou hukou or not.

He said the city wants to encourage holidaymakers to continue to buy homes on the island.

In 2010, the real estate industry contributed about 25 percent of the city's total revenue and nearly 60 percent of homebuyers in Haikou did not have a hukou registered in Haikou, Economic Observer News reported on Monday.

After a series of strict policies on home purchases, tightening monetary policies and a price cap, the city's tax revenue from the real estate industry fell by nearly 70 percent year-on-year in the first quarter in 2011, according to the latest statistics from the Haikou taxation bureau.

Only 302 commercial houses were sold during March, which was a year-on-year decrease of 90 percent, but the average selling price did not fall, data from the China Index Academy showed.

Feng Ke, director of the real estate finance research center at Peking University, told house.hexun.com on Tuesday that many homebuyers were scrapping their plans to buy because of the restrictions, which had negatively impacted Haikou's development, especially in the tourism sector.