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The product we are building requires immediate contact book sync after sign up.

Right now I have to decide how to display info that the contact book is syncing:

A. Have a small box on app UI which says - Syncing your contacts:

enter image description here

B. Blur the content underneath and show just the info:

enter image description here

C. ??

It's worth to mention that you can't play around with application while we are doing this.

What would you suggest?

P.S. Examples are very rough sketches

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You answered your own question when you said:

It's worth to mention that you can't play around with application while we are doing this.

Since that's the case, you need a true modal dialog which let's the user know they can't do anything until the syncing is finished.

Therefore, you have to go with Option B.

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