Quite a number of foreign investment banks lowered their forecasts for China's economic growth because of the real estate sector.

UBS AG lowered its 2014 and 2015 forecasts to 7.3 from 7.5 percent and to 6.8 from 7 percent, respectively.

Pan: China's property market, another Titanic

Home prices spurring a panic or patience?

"Our sensitivity analysis suggests that a 10 percentage point drop in the growth of construction volume would result in a 2.5 percentage point drop in GDP growth, including second round effects," Wang said.

Nomura Securities Co Ltd said declining real estate investment could drag economic growth to 6.7 percent for 2014 and 5.8 percent for 2015, if there are no policy stimuli.

"Our baseline remains that the government will have to loosen fiscal, monetary and property sector policies significantly to achieve our forecast for 7.4 percent GDP growth in 2014," Zhang Zhiwei, a Nomura economist, said.

This expectation may turn true. On May 22, Premier Li Keqiang visited Chifeng in Inner Mongolia autonomous region. He said the economy is generally stable but faces downside risks and the government should take it seriously.

"We believe this statement is stronger than his statements from previous speeches and indicates policy easing may pick up speed," Nomura's Zhang said.

"It reinforces our view that fiscal and monetary policies will be loosened in the second quarter to stabilize growth and counter the macro risks from the property market."

China's property downturn will also impact the rest of the world. Commodity exporters and some regional economies with large exposure to China's domestic demand would be most affected by a property downturn in China. Commodity prices and currencies may react negatively too, according to UBS.

Top 9 luxury property sales centers	China Vanke says property sector's 'golden era' over