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I think the main point was that these are not secured loans. The developers operate in a ponzi like fashion, so there is nothing to foreclose on and no cash to

• naveen99 4y ago
  Typically banks release money as construction incurs expenses, not all at once before construction begins. Atleast in the usa.
  • chii 4y ago
    i think this point is not clear to many people! Construction companies in the USA (and the west typically) don't get paid up front 100% for the full amount, but is often paid "pro-rata" based on milestones or % completed. The funds a released by an escrow (which the purchaser and the bank, if it's a mortgage, would choose). The situation described in china is not like that above - the developers got paid 100% of the cost of the build upfront, by the purchaser. The bank loans the funds to the purchaser for this purpose (at 60% LVR for example). The bank has the title as collateral - but since the property isn't built, there's no property to sell if it goes bad. It's just the land title. The reason the banks do this is because it's a politically driven mandate - the CCP in the past, wanted more construction, and this is one way to drive risk away from developers (so there'd be more developers!).
    • naveen99 4y ago
      I think you can buy land at 50% LTV in the us also.