Construction of new houses has "effectively stopped" since the Central Bank published its proposed mortgage rules in October.
According to lobby group the Construction Industry Federation (CIF), the Central Bank's plans have brought a huge degree of uncertainty to the market and strangled what hopes there were for the building of new homes to deal with the housing shortage.
"House building has effectively stopped since the rules were published," said a CIF spokesman.
"Projects that were in the works or may have been started have been stalled all over the country as our members wait to see how this plays out.
"If you are in the business of building houses, you depend on predictable demand. The Central Bank's plan has caused huge disruption to that demand and builders now have very little visibility on what the market will be like in the near future," he added.
The problems in the market are particularly acute beyond Dublin, where the economics of new construction are much less certain than they are in the capital.
"Outside Dublin, it is still more expensive to build a new house than buy an existing one, but those economics were beginning to change as house prices rose. You have to remember, prices were not gaining in leaps and bounds around the provinces. Now, builders had started to look at the market and think to themselves that 'new builds may not be viable today, but if I start a project now, by the time I get this project completed in a year's time I will be able to sell them at a profit'.
"That type of mindset has now had to go out the window and we are stuck back at square one," the spokesman said.
The IMF in its concluding statement following its latest visit to Ireland said measures need to be taken to stimulate housing construction.
The Fund backed measures such as "use it or lose it" building permits and a vacant site levy to help force developers to start building or be penalised. That measure has been heavily criticised by property groups.
Industry groups have repeatedly claimed that the Central Bank rules would disproportionately hit first-time buyers as they buy the vast majority of new builds.
In a report compiled by accountants Grant Thornton and submitted by the CIF to the Central Bank, the federation warned that if the rules requiring a 20pc deposit and limiting loan to value ratios to three-and-a-half-times salary were brought in, they could have severe ramifications across society.
"It is likely that property buyers will simply raise the funds for the deposit in another way.
"The primary method will be to gain an unsecured loan from a financial institution. With higher interest rates, such loans are significantly less appealing for the consumer.
"However, with the extraordinary levels of demand, high rents and simply the need for a property, there will be no other option, thus further reducing affordability," the report claimed.
The CIF is not against tighter lending controls, but wants a more phased approach from the Central Bank.
Even the revised proposals are much harsher than what the CIF would like to see.
According to the federation's submission to the Central Bank, the CIF want a loan to value ratio of 95pc to be brought in immediately, and for that to be lowered to 90pc after one year. After that, the Central Bank would review the loan to value ratio periodically and adjust them as needed.
Meanwhile, the loan to earnings ratio should be capped at four-and-a-half-times salary immediately, and then reduced to four-times salary after one year.
The Central Bank would then review that ratio as required.