Masilela is currently training with Moroka Swallows to keep fit, but has now learned that Maccabi Haifa have signed a fifth foreign player, meaning he will not be able to go back to Israel.
His agent Mike Makaab says Italian Serie A side Cesena are interested, but still has only a month to find his client a new club before the transfer window closes.
"I have one year left on my contract with Haifa," Masilela told the Sunday Times.
"They signed a fifth foreign player when I was on my way to Leicester because we all thought the deal was finalised. Anything is possible in football and I would rather play in the PSL than sit idle.
"I am frustrated because it is nice to be with your teammates and at a team you will be playing for during off-season.
"This has changed my plans, which were to leave Haifa while on loan so that Leicester could exercise the option to sign me permanently at the end of the season.
"My business manager, Mike Makaab, is talking to several clubs in Europe."
Masilela revealed he is not concerned about losing his place in the Bafana Bafana team ahead of the friendly against Burkina Faso at Ellis Park on August 10.
"We are all rusty at this stage," he added. "All of us have not played a competitive match for over a month.
"The Burkina Faso friendly will help us regain our sharpness. It's also our last chance to prepare for Niger in September.
"I heard coach Pitso Mosimane went to Niger to inspect the facilities and said conditions there were not for sissies and he would only take soldiers."