Wide-ranging credit tightening by Chinese commercial banks is likely to spill over into the property market, and analysts said small and medium-sized developers may cut prices later this year as cash gets scarce.

One of the latest changes is that homebuyers need more time than before to apply for public housing fund mortgages, sources said.

"It usually takes between one and two weeks to go through the application for the public housing fund mortgage, but now the process has been prolonged greatly, without a specific timeline," said Lu Qilin, research director at Shanghai Deovolente Realty.

In Beijing, only four commercial banks still offer 15 percent discounts on benchmark mortgage rates for first-time home purchasers, pushing up the cost of owning a house, the Beijing News reported on Tuesday.

"Speculators said the current mortgage discount for first-time buyers, or 85 percent of the benchmark mortgage rate, will be dropped amid ebbing liquidity, but there will be nothing taking effect within a month," said Wu Ting, a senior property consultant with Sunrise Realty Group at Pudong New Area in Shanghai.

The flip side for homebuyers is that they may expect price cuts at some projects if developers find themselves short of working capital.

"Developers rely more than 20 percent on bank loans, and between 30 and 40 percent of their capital comes from other financing sources such as trust and informal financing. The remaining 30 percent comes from payments by home buyers," said Hui Jianqiang, research director of Beijing Zhongfang-yanxie Technology Service Ltd.

Credit lines from commercial banks are usually quite loose in the first half, while conditions usually tighten up in the second half. The credit shortage in this year's first half is unusual, said analysts.

"To be honest, with the consistent capital pipeline, Chinese commercial banks have hardly ever had any difficulties with credit. The central bank's changing perspective on credit lines will lead commercial banks to seriously think about their future and reshape their capital structure," said Hui.

For domestic developers, most financing sources are linked to commercial banks. With a credit tightening, developers will feel the pinch in the second half, Hui added.

Financial channels other than commercial bank loans, such as trusts, funds and shadow banking, will be the most affected. That has specific implications for small and medium-sized developers who can hardly get loans from commercial banks, said Chen Sheng, vice-president of the China Real Estate Data Academy.

Zhang Hongwei, research director of Shanghai-based property consultancy ToSpur, warned that developers who poured a lot of capital into stockpiling land in the first half may be hit hard.

"The most effective way to claw back capital is to mark down prices at property projects," said Zhang.

Hui said the spike in housing prices has outpaced the growth of GDP over several years, and it's time for "a correction" of the housing market boom, which is still being fueled by speculation and blind investment.

"Short-term pain will lead to a healthier property market with an optimal structure," Hui added.

wang_ying@chinadaily.com.cn