> So they're less leveraged than most American home purchases of 5~20% down payment.
the american home is already built (mostly), for such a down-payment. The bank takes the home as collateral.
If it was an off-the-plan purchase (which is what the OP described), you don't really pay the full amount, but just a deposit (like 10-20%). The risk of the development falls solely onto the developers, not the buyer - the deposit is held in escrow, not used for funds to pay for construction or other developer activities.
> You keep describing how this works in most places as if it's something outrageous
that's because it is, when you compare it to western developments. The risk in real estate development in china lies solely on the buyer, and it's absolutely not the case in the west.
It is not typical in the western markets, but this kind of practice is fairly common in many markets. For example in India it works the same way, and most times the down payment is only 10%-20% or less. Generally the banks don't release parts of the money to you/developer unless certain milestones are complete. [1]
The practice of advancing money before construction completes, reduces the price for the buyer as already built properties sell for much higher than buying early. So buying early is way to buy a house when the prices are already out of reach for most. It can work if the project and financing is well regulated by the banks.
The property is cheaper[2] because these risks of delays, developer not finishing, not getting approvals so on exist and in theory is factored into the price, along with hedging future inevitable price increases.
[1] Indian real estate is by no means healthy and has its fair share of problems with these practices and delays, but not close to China's scale.
[2] In theory the risk is exactly matched by discounted price, but in practice seller will usually price it a bit higher than the value warranted by the risk factors. Also on average while it may work out, individual buyers may loose life savings as they are betting the farm literally when any specific purchase goes sour.
the american home is already built (mostly), for such a down-payment. The bank takes the home as collateral.
If it was an off-the-plan purchase (which is what the OP described), you don't really pay the full amount, but just a deposit (like 10-20%). The risk of the development falls solely onto the developers, not the buyer - the deposit is held in escrow, not used for funds to pay for construction or other developer activities.
> You keep describing how this works in most places as if it's something outrageous
that's because it is, when you compare it to western developments. The risk in real estate development in china lies solely on the buyer, and it's absolutely not the case in the west.