The repercussions from real estate defaults in July have seen property owners from 60 cities in the provinces of Henan, Hunan and Hubei refuse to pay their mortgages after developers halted construction on apartment blocks. Despite accounts supposedly being supervised by banks, some property developers were found to have embezzled cash, siphoning investments to different accounts or making fraudulent interior decoration contracts. Except for Beijing and Guangzhou, capital of Guangdong Province, where strict rules have been in place since a real-estate crisis 20 years ago, supervision of pre-sale funds has loosened across the country. Banks, with their dual role of lender and supervisor, have turned a blind eye to reckless loans and embezzlement. Local governments are asked to protect the basic rights of property owners, who are eligible for refunds as long as they adhered to the contracts they signed.
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