The way OP described it, yes, it sounds like a ponzi, but in reality it's more like crowdfunding. First, the developer takes credit from a bank and uses own mon

The way OP described it, yes, it sounds like a ponzi, but in reality it's more like crowdfunding. First, the developer takes credit from a bank and uses own money to buy a land. Then, in order to start construction, the developer sells what is basically an obligation to build real estate and transfer the rights to buyer. These obligations are obviously cheaper than the expected price of real estate in the future, and also cheaper than already-constructed real estate now. The developer does not sell all the future real estate at once, because as the time goes by, and construction comes closer to a finish, the obligations become more expensive - it sells only the amount necessary to fund the next step of construction. After the construction is finished, developer sells leftover real estate with a markup big enough to finance its next project. When the housing market is good, this scheme brings real estate costs down, because you can buy cheaper "not-yet-build" flats or houses, and the developer can seek funding without overpaying on the bank loans. But if the housing market tanks, the development freezes, and the first buyers take a loss. I don't know about China, but in some countries such obligations are mandatory insured from the default, so people can get at least some of their money back. In others buyers are left with a piece of land with unfinished building.