Paying a Mortgage on a Home You Cannot Move Into: What China Teaches Off-Plan Buyers

Imagine paying a mortgage every month on a home you cannot move into — because it has not been finished, and nobody can tell you when it will be. That is what happened to many buyers in China, and it is the most instructive real estate story of the last decade for anyone buying off-plan in Addis Ababa.

How the boom was built

Before 2021, China's property sector was booming. Buyers purchased unfinished homes — often through bank loans — and developers relied heavily on those buyer payments, plus their own borrowing, to fund construction. Money from today's buyers built today's towers.

Then some developers went a step further. They used the money from one project to launch new projects before completing the existing ones, depending on more sales and more loans to keep everything going. Each new project needed the next one's cash. As long as the music played, it worked.

Then the music stopped

In 2020, China introduced borrowing restrictions known as the "Three Red Lines" to curb excessive developer debt. As financing tightened and the market weakened, many projects stalled — the money that was supposed to finish them had already been spent starting others.

Buyers were left waiting for homes that were not being built, while still facing their mortgage payments. Confidence fell, fewer people bought, developers had even less cash — and the crisis fed itself.

What can we learn from this?

Our market is not China's, and I am not predicting anything. But the mechanism — buyer money funding construction, new projects launched on the back of unfinished ones — is not foreign to any fast-growing city, including ours. So before buying an off-plan home, ask:

• What has the developer completed and handed over? Not announced, not launched — handed over, with families living inside. Go and see one.
• How far has construction progressed? Visit the site yourself, or have someone you trust send dated video. Progress you can see beats a schedule you are told.
• How will the remaining work be financed? From your payments alone? From the developer's own funds? From a bank? A developer who cannot answer this clearly is telling you something.
• What does the contract say about delayed handover? Is there a penalty? A right to cancel and recover your money? I have written about the delay-penalty question and about how Turkey rebuilt trust with a law that makes developers pay for delays — both are worth reading next to this.

Ask for evidence, not just promises

Your future home depends on the developer's ability to deliver. Not on the brochure, not on the sales office, not on the size of the launch event. On delivery. Everything you are given before you pay should help you judge that one thing — and if it does not, keep asking until it does.