The central government has tightened mortgage lending to both individuals and developers in the latest move to rein in soaring housing prices.

Commercial banks need to limit the access to credit of buyers of multiple homes, the People's Bank of China reiterated over the weekend.

In April, the banking regulator required buyers of second homes to make a 50 percent down payment and pay interest back at a rate 1.1 times higher than the benchmark. Banks were also given the authority to refuse to give mortgages to prospective buyers who already own two apartments.

The measures started taking effect by early summer and home sales are now dropping, although prices remain stubbornly high. Consumers, however, are optimistic with 60 percent believing housing prices will drop, according to a survey conducted by the China Index Academy.

Homebuyers and developers have now entered into a standoff, as consumers await the price drop. This has left developers without cash.

And now it is becoming more difficult for developers to get loans, further straining their capital.

The Ministry of Land and Resources (MLR) has joined the assault on derelict developers.

The MLR gave the China Banking Regulatory Commission (CBRC) a list of real estate firms that are hoarding land with the implication that they are to be cut off from loans, an official from the MLR was quoted by China Business Journal as saying last week.

The CBRC said at its third economic and financial meeting recently that a 30 percent decline in house prices and an interest rate hike could cause a dangerously high amount of bad loans to hit the banking sector.

"Some developers will see their capital chains collapse," a senior official of the banking regulator was quoted by Xinhua News Agency as saying last week.

Although China's most controversial property tycoon, Ren Zhiqiang, appealed to developers to reduce home prices on their own to avert a more catastrophic collapse later on, few firms took actions.

"We have no plans to reduce prices now, and we will expand more channels to finance overseas. Actually most of our capital comes from foreign financial institutions," said an anonymous employee responsible for investor relations with Agile Group, a property developer, Monday.