The Chinese government will ensure that any measures it takes in its efforts to control housing prices will not hurt the property market as an economic growth engine, Deloitte has predicted in its latest China Real Estate Investment Handbook.

This is more so because the country's economy is still on its way to recovery, the professional services firm added.

"The government understands the importance of controlling prices in the property market due to its welfare nature. However, it still relies heavily on fixed investments, especially in the current economic slowdown," said Richard Ho, real estate managing partner at Deloitte China.

"As the overall investment in the property market is likely to climb gently along with the recovery in sales this year, the regulators will keep a close watch on the industry and if prices rise sharply, more restrictive macro measures will be put in place."

While urbanization and economic growth will constantly drive the real estate market in China, developers will continue to face funding challenges as a result of their declining profitability and operating efficiencies, as well as the tightening of monetary policy in China since 2010, Deloitte said.

Smaller property companies which have been struggling to survive will become acquisition targets for their larger peers and business trust will emerge as an alternative funding vehicle for Chinese developers, according to the handbook.