However, some analysts didn't seem too concerned. Carol Wu, Head of Research, Equity Research, China Property at DBS Vickers told CNBC's Cash Flow, "I think market maybe over-panicked to latest news reports about the situation among Chinese developers. I believe bank credit to developers and home buyers will see a slower growth this year but it will remain fairly accessible. Developers will still be able to sell in first-tier cities, and I don't expect a replay of 2011's credit crunch where banks stop credit lending and buying sentiment weak."
Banking stocks were also in the doldrums; Shanghai Pudong Bank and Minsheng Bank slumped over 1.6 percent respectively.
(Read more: Does the yuan's slide mark a major policy shift?)
Sydney falls 0.1%
Australian shares reversed early gains, effectively snapping a seven-day rally after the benchmark S&P ASX 200 index touched 5,461, its highest level since June 2008, earlier in the session.
While National Australia Bank (NAB) and Macquarie saw gains of 0.2 and 1 percent each, losses in banking peers weighed on the overall market. Westpac dropped 0.5 percent while Commonwealth Bank of Australia (CBA) slipped 0.2 percent.
Mining stocks further pulled down the index; Fortescue Metal raked in the greatest decline with a fall of 2.5 percent.
Earnings season continues in Sydney. Atlas Iron erased early gains to fall 2.3 percent, despite posting a first-half profit. Qantas Airways also lost early gains to fall 0.4 percent, after Australian media reports that the airline may announce 5,000 job cuts and asset selling when it releases its earnings on Thursday.
(Read more: Sugar in coffee:Sweet spot for investors?)
Korea adds 0.8%
South Korean shares shrugged off Monday's dismal showing to pull in gains on Tuesday.
Naver is a top performer, rising more than 5 percent, upon news that Japan's Softbank may be keen on its messaging unit. Naver has however refuted the report.
Samsung remains in the limelight after releasing its latest Galaxy S5 at the Mobile World Congress in Barcelona. Shares of the smartphone maker rose 0.5 percent.
Meanwhile, investors also digested President Park Geun-hye's three-year economic plan unveiled on Tuesday. The plan will focus on regulatory reform with an aim to boost gross domestic product (GDP) growth by 4 percent by 2017.
Bangkok rises 0.2%
The benchmark SET index rose, despite latest trade data showing that Thailand's trade deficit widened to $2.52 billion in January from $285 million in December. The Southeast Asian country continues to see escalating violence from ongoing demonstrations against Prime Minister Yingluck Shinawatra.
— Follow us on Twitter: