THE massive Caltongate site is set to mothballed for a year or more after the Bank of Scotland ordered administrators not to sell the site on the cheap.
The Edinburgh-based bank is owed 73.8 million by Mountgrange Capital and is concerned that, in the current market, the site would not sell for enough to get it the money back.
It is understood to have asked Deloitte, Mountgrange's administrator, to wait until the market improves before pushing for a sale.
Property experts say that it is likely to mean the site will lie empty for at least 12 months.
It is just the latest delay for the proposed 300m transformation of the key Old Town site, where plans were originally drawn up more than four years ago.
It is one of a number of key sites lying empty in the city because of the economic downturn.
Deloitte has still not appointed a selling agent to market the site, more than a month after it gained control of it following Mountgrange's collapse.
It has admitted that it does not expect a sale "in the short term" because it is unlikely that it would realise the "best value" in the current economic climate.
One source close to the project said: "The administrators are taking instruction from the bank. It is likely that it is the bank who want to sit on their hands.
"The Bank of Scotland is the whole powerhouse in the site. By putting a company into administration they have already distressed the assets and devalued them."
The troubles at Mountgrange were first revealed by the Evening News in February after it emerged that it suffered a 24.3m loss in the year and was trying to tie up bank funding to keep it going.
A month later, Deloitte was appointed as the firm's administrator after its attempts to secure further funding failed.
John Reid, joint administrator at Deloitte, said: "As yet, no formal offers have been received from any party in respect of Mountgrange's assets. The joint administrators are currently in the process of assessing the best strategy for the realisation of the assets and will employ the relevant marketing process in due course.
"We do not anticipate a sale in the short term as it would be unlikely to realise best value for the asset, however, they will consider all offers received on their merits."
Stewart Taylor, director of business space at property firm CB Richard Ellis, said: "The opinion at the moment is that the market is at or close to the bottom. We'll bump along for the remainder of 2009 but we won't see any marked increase until 2010.
"It seems like a sensible strategy to not rush into any sale. Administrators will always look at whatever the best strategy is for getting value in."
At the time of its collapse into administration, Mountgrange had said that delays to the planning process had proved fatal.
The city council and Edinburgh Chamber of Commerce have now set up the Edinburgh Development Forum to look at how to speed up the planning process.
John Bury, the council's head of planning, said that the council wanted to encourage a "one door" approach where developers have closer advise and guidance from planners at an early stage.
"I would hope pre-application discussions would mean that the application is far quicker when it is lodged. The St James Centre is a good example: there was a lot of pre-application discussion.
"When it went through it was lodged relatively quickly in only five months."