Alarmed by persistent weakness in the property market and its increasing drag on the economy, policymakers said on Monday they were cutting downpayment levels for the second time in six months and offering bigger tax breaks.

The hope is that by making it easier for buyers to get mortgages, China can revive the housing market, which accounts for 15 percent of its economy, and where prices are falling at a record pace.

But for bankers charged with passing on the policy discounts, homebuyers' gains are being made at their expense, in some ways.

"The difficulty for us now is that the deposit has gone down, which increases the risks," said a loan officer at one of China's four biggest banks. "It's a question of leverage."

For another banker at a mid-sized Chinese bank, whether borrowers will get downpayment rates of 40 percent will depend on their risk profiles and the bank's assessment of the property market in that region.

"For certain executives at state-owned enterprises, government officials, the lower rate should be no trouble at all," the banker said. "But I can’t say that it’d be lowered to 40 percent for other people."

ALREADY LOSING MONEY

The order to Chinese banks to shore up the flagging housing market comes as banks themselves face greater pressure from China's cooling economy.

As growth in the world's second-largest economy grinds to an expected 25-year low of around 7 percent this year, banks are contending with thinning profit margins and bad debt levels that have hit multi-year highs.

Even though China cut interest rates twice in just over three months by the end of February, home prices fell at a record annual rate of 5.7 percent last month.

Yu Liang, president of China Vanke (>> China Vanke Co., Ltd.)<2202.HK> , the nation's largest property developer, said he hoped a bigger tax break for buyers would revive demand for existing homes, but warned of a large inventory of unsold property.

"Whether the current measures are able to support the property market remains uncertain," economists at Singapore's OCBC Bank said in a research note.

"Nevertheless, it is getting clearer that (economic) growth has again topped policymakers’ minds," they said, adding that they see more interest rate cuts and other easing measures between April and June.

For share investors, however, easier lending policies for home buyers are welcome news.

China stocks <.CSI300> tore to seven-year highs on Tuesday, driven by bank and property shares. They have rallied 16 percent this year after soaring 50 percent in 2014, buoyed mostly by expectations of further policy loosening.

The surge in property shares drubbed investors who have shorted Chinese real estate stocks, which top the most shorted counters in Asia Pacific this week, ahead of earnings releases.

Markit data showed China Vanke is the most shorted stock in Asia this week, with short interest taking up about a fifth of shares out on loan. Evergrande Real Estate Group (>> Evergrande Real Estate Group Limited), China's fourth-biggest property developer, was the next most shorted stock.

It remains to be seen whether bets against the housing market can pay off. But for some bankers, cutting downpayments is as much as lenders can take, for now.

"We’re already losing money at a 70 percent downpayment level," said a banker at a mid-sized Chinese bank. "We’re unlikely to reduce the lending rate."

(Additional reporting by Pete Sweeney in SHANGHAI and Umesh Desai in HONG KONG; Writing by Koh Gui Qing; Editing by Kim Coghill)

By Engen Tham and Clare Jim