Well they are essentially banking on the prospect that the market value of the block on completion at title stage, will be higher than when they contracted to buy it off the plan.
There may be a difference of 6 months or even 12 months between contracting to buy and having to settle.
This has been the case for the last 2 to 3 years in Perth ( well greater WA for that matter).
So you would get in at the stage release on a $500 deposit or $1000 deposit, and then when it come time to settle, you have onsold to the next buyer for anything between $30,000 to $70,000 more.
The two settlements occur concurrently so you do not need to raise finance to 'pay' for the block, but you still wear the stamp duty and selling costs in flipping the block to the next purchaser.
State govt collects 2x stamp duty, one for the initial contract price, and one for the new contract price.
You, the seller may nett $20,000 or $50,000 for your $500 or $1000 deposit.
Multiply this by say 5 or 10 blocks and its a healthy living..
Only works in a rising market where the demand outstrips the available supply of blocks.
Most develpers are clamping down on the process, by requiring you to build on the land before being able to onsell the property, with penalties if you do not comply.
Also, there has been quite a backlash from first homebuyers and prospective homeowners, as they get priced out of the market, and as a result the govt. and the developers are responding by using alternate methods of releasing land.
kp