The developer of Top Forest Villa, a luxury real estate project in the Sheshan area in Shanghai that has captured newspaper headlines over the past few days due to its expensiveness, has been told to lower prices and register with the local industry watchdog.

The project, developed by Shanghai Xiangfu Real Estate Co Ltd, had an initial price tag of 246,000 yuan (US$38,021) per square meter for one villa. It was the highest asking price recorded in the city so far and has been judged by the local housing authority as "overpriced."

The developer should reset its asking price based on other units sold in this project, while also considering prices of nearby housing developments, the government said in a notice.

"Taking into consideration the sluggish sales at this development... it seems the high price might just be a marketing strategy," said Song Huiyong, research director at Shanghai Centaline Property Consultants Ltd, operator of the city's largest real estate chain in terms of transaction value. "However, it could also be an indication that developers, who have had very slack business over the past few months, still remain upbeat about the local property industry."

In response to the government notice, the developer lowered its price on Tuesday for that particular unit to about 216,400 yuan per square meter. The priciest unit at the project is now 238,000 yuan per square meter.

Fifty-five units at the project were put on sale on June 11, among which seven were listed for more than 200,000 yuan per square meter, according to the city's real estate website.

The city's housing bureau confirmed one unit at Top Forest Villa had been sold since June 11. It sold for 67,900 yuan per square meter.