Manchester City's talks with Santos about the future of Robinho have broken down and the player is preparing to return to England and the deeply unsatisfactory prospect of beginning the season at a club where he knows he is not wanted and is profoundly unhappy.

The man whose £32.5m signing from Real Madrid on the day of the Abu Dhabi United Group's takeover was supposed to symbolise the club's new ambitions has been unable to secure a deal elsewhere, with City informing Santos they will not entertain the idea of extending his loan, which expires next Wednesday.

That has left Robinho in a state of limbo, with buyers put off by the high valuation City have attached to the 26-year-old after his illuminating performances for Brazil in the World Cup. Robinho has come to be regarded as a huge letdown by the men in power at Eastlands but they are determined not to lose face by allowing him to leave on the cheap and want in excess of £20m. As Robinho is discovering, that immediately rules out Santos, whereas the clubs in Europe with that spending power appear to have other targets.

Robinho may now have little option but to return to Manchester, a city he never embraced, and set about trying to rebuild his relationship with Roberto Mancini, someone he has accused of managing with a "lack of ability".

Whether the damage can be repaired remains to be seen and, if no buyer is found, it cannot be discounted that Mancini will exclude him when he submits his 25-man Premier League squad on 1 September, throwing up the extraordinary possibility of the most expensive player in English football collecting his £160,000-a-week salary from the stands, only a few months after establishing himself as one of the stars of the World Cup.

The situation is not ideal for either party and Robinho did not attempt to conceal his regret after his final match at Santos's Vila Belmiro stadium – a 2-0 win in the first leg of the Brazilian cup final against Vitória – ended with him being given a standing ovation.

"This display of affection from the fans really touches me because this is my home," he said. "I hope I can stay but it depends on Manchester City. I hope this is not my last game here but, for now, what I have been told is that they [the negotiations] are at a standstill and I have to go back to Manchester."

Santos claim City have asked for €40m (£33.5m), which seems to be an exaggeration, but the Brazilians would not be in a position to pay even half that amount.

Luis Alvaro de Oliveira Ribeiro, the club's president, said: "We are negotiating and we are hopeful, but Manchester City have made it clear to us they are not going to loan him again and that they just want to sell him. We can try a new loan in January. I think it would be easier then."

Evandro de Souza, Robinho's agent, said: "Unfortunately, this will probably be Robinho's last game at Vila Belmiro. Manchester City have already told me and Santos they want him back after the end of the [loan] contract."

Robinho's thoughts about returning to Manchester can be gauged by the fact that when he moved to Santos in January he arranged for all his belongings to be shipped to Brazil, put his UK-registered Lamborghini up for sale and informed his landlord he would not be returning to the house he had rented since the previous summer. The forward had strategically chosen to rent after moving out of his first house because of a dispute with neighbours about the noise level at which he was playing music.

As it stands, Robinho will be under orders to fly to England after Brazil's friendly against the USA on 10 August and could, in theory, be involved in City's opening league game at Tottenham Hotspur four days later. Mancini, however, has been planning without him, with David Silva signed from Valencia for £25m and Mario Balotelli on his way from Internazionale for a similar fee, both of whom can play in Robinho's preferred position on the left of attack. One of the people involved in the Balotelli talks indicated today the different parties were still "substantially apart" in terms of the fee and his salary, but it is still expected to be resolved.

"The situation is that Robinho will finish his contract with Santos," Mancini said. "He will stay in Brazil for another week, play for the national team and, after that, he will return to Manchester City."

Asked if he had any issues taking him back, Mancini said: "At this moment, no. But it depends on him."

Meanwhile, the Chelsea manager, Carlo Ancelotti, believes the talented Balotelli will enhance City's prospects of becoming a major force. "With him, Manchester City will challenge for the title, not just fourth place," said the former Milan coach. "The Premier League is the ideal place for him. Mario is a crazy talent."