The panel considering fast-tracked consent for the complex in Hansen Rd, Frankton, signalled it would decline to approve the development unless significant revisions were submitted.
This would involve removing one storey from several blocks as part of a reduced-height proposal.
Changes to better integrate building heights with the character of the surrounding environment — particularly a local shopping centre zone and natural landscape — could enable "a narrow window of opportunity to achieve a grantable proposition", the panel said.
More should be known within a week about where the project stands.
The panel is due to issue a final decision by Monday next week.
Australian-based No.1 Hansen Road Ltd submitted its application for fast-tracked consent in November last year for plans to build a 554-unit complex.
In an assessment of environmental effects, the company said this could provide accommodation in the heart of Frankton for up to 710 local workers.
The buildings had been designed to reflect an alpine village, in a parkland setting, the company said.
The panel considering the application for the Environmental Protection Authority said it did not know whether a reworking of plans would result in a project that was economically feasible.
Sticking points have included information about landscape and visual amenity.
In a peer review, Wanaka landscape architect Anne Steven flagged a series of concerns.
Among her conclusions were the site’s sensitivity had been undervalued and a "metropolitan" future of the environment had been assumed incorrectly.
A No.1 Hansen Road Ltd spokesman has said the project could meet more than 10% of the expected increase in rental accommodation demand over the next 10 years and reduce pressure during a housing crisis.
