Property stocks rallied on Tuesday as developers are likely to benefit from the additional liquidity released from the reduction in the banks' reserve requirement ratios by the Chinese central bank.

An index that tracks the country's listed real estate developers in both Shanghai and Shenzhen rose 3.5 percent, outperforming the benchmark Shanghai Composite Index which gained 1.68 percent.

A dozen property stocks surged by the 10 percent daily trading limit after the People's Bank of China cut the reserve requirement ratio for banks by 50 basis points on Monday.

The RRR cut, which is expected to release between 600 billion yuan ($91 billion) and 700 billion yuan of liquidity, will help expand the banking credit available to the property market, a highly credit-sensitive sector, analysts said.

"The RRR cut will release more banking credit for property developers, providing strong support for housing prices, especially in first- and second-tier cities," said Dai Jupeng, an analyst at Sealand Securities Co.

The additional liquidity in the banking system will also prompt lenders to expand personal mortgage loans, which could further push housing prices higher, Dai added.

The government has issued a slew of favorable policies to stimulate the country's property market amid a slowing economy, which has made the property stocks more attractive than other sectors in terms of investment opportunities in the short term.

"Monetary policy is one of the most important factors that help determine the fundamentals of the property sector," said Yan Changming, an analyst at Industrial Securities Co, in a research note.

"Given the monetary easing stance by the central bank, the sector will continue to benefit from it."

The central bank lowered mortgage down payment requirements to the lowest level ever last month. The Ministry of Finance also cut the taxes on home transactions in a bid to help reduce oversupply in the property market.

Analysts at Ping An Securities Co have suggested investors could go overweight on property stocks given the policy stimulus and relatively low valuations of developers amid the volatility of the general market.

Xie Haoyu, a property analyst at Huatai Securities Co, said long-term investment opportunities could emerge from leading developers that possess the strength to carry out mergers and acquisitions.

"The supply-side reform for the property sector is about destocking. Necessary M&A activities within the sector could help reduce the market oversupply," Xie said.

While the latest RRR cut could help spur sales for all developers in the short term, only the leading property developers will likely benefit from the M&A trend amid the supply-side reform in a long run, Xie added.