Stock markets have fallen sharply in China on indications that the government would step up its efforts to cool the property markets in the country.

The central government is to looking to cool the property market ahead of the crucial annual parliament meetings. The Shanghai Composite fell 3.7 per cent and Hong Kong's Hang Seng recorded a fall of 1.5 per cent.

The Shanghai Stock Exchange Property Index that measures the performance of property developers fell 9.3 per cent. China Vanke, which is listed in Shenzhen, recorded the highest fall of 10 per cent, Shanghai-listed Poly Real Estate fell 10 per cent and Hong Kong's China Overseas Land and Investment declined 7 per cent.

The central government is planning to step up efforts including higher income tax on homeowners who make profits from the sale of property. Higher interest rates and down payments will be imposed on purchase of second property in cities that have rapidly rising prices of real estate. The central government has said that it will also impose penalties on local governments and officials for not curbing property prices.

The government has relaxed property ownership restrictions in recent times and large amount of money was invested in the property markets, resulting in rising prices of property in the country.