Bangladesh’s real estate sector is going through a challenging period as high interest rates, rising construction costs and weaker investor confidence continue to slow market activity. While demand for housing remains fundamentally strong, the pace of transactions—particularly in the luxury segment—has declined significantly.
The slowdown is most visible in premium residential markets such as Gulshan, Banani and Dhanmondi in Dhaka, as well as Khulshi Hills in Chattogram, where apartment sales have come under considerable pressure.
Industry stakeholders believe the current situation should not be viewed as a structural collapse in housing demand. Rather, the market is being affected by three interconnected factors: financing constraints, rising construction costs and declining consumer confidence.
High Interest Rates Weigh on Homebuyers
Financing has emerged as one of the biggest challenges facing the real estate industry.
Home loan interest rates, which were around 9% in early 2022, climbed to as high as 17% in 2024 and currently remain around 14%. Such elevated borrowing costs have made long-term home financing increasingly difficult, particularly for middle-income households.
The higher cost of borrowing has effectively reduced the number of buyers who can afford to enter the property market, even among those with a genuine need for housing.
Industry observers argue that bringing mortgage rates down to a sustainable level will be critical for reviving demand and restoring momentum in the sector.
Construction Costs Rise Sharply
Developers are also facing significant pressure from rising construction costs.
Prices of major building materials, including steel, cement, bricks, sand and stone, have increased by more than 40% over the past several years. The increase has substantially raised project costs and reduced developers’ ability to offer lower prices.
This has created a difficult equation for the market: developers are facing higher input costs, while buyers are simultaneously struggling with reduced purchasing power and expensive financing.
As a result, both sides of the market are under pressure.
Investor Confidence Remains Weak
The third major challenge is confidence.
Recent political and economic changes have encouraged many prospective buyers and investors to adopt a wait-and-see approach. Even where underlying demand remains intact, uncertainty has delayed purchasing and investment decisions.
The resulting slowdown in transactions has affected overall market liquidity and contributed to a more cautious investment environment.
However, industry stakeholders maintain that Bangladesh’s long-term housing fundamentals remain strong.
Rapid urbanisation, continued rural-to-urban migration and the formation of new households every year are expected to sustain demand for residential property over the long term.
Affordable Housing Finance Seen as Key Priority
Industry representatives are calling for stronger government support to revive the housing market, with affordable long-term financing emerging as a key priority.
They argue that mortgage interest rates should ideally be brought down to around 5%, while loan tenures should be extended to between 20 and 30 years.
In many developed and emerging economies, long-term housing finance plays a major role in supporting homeownership. Housing is not only an investment asset but also a basic necessity and an important component of social and economic stability.
Bangladesh, however, continues to face structural limitations in developing a deep long-term mortgage market because the banking system relies heavily on short-term deposits.
A specialised housing finance framework, refinancing facility or dedicated mortgage market could help address this mismatch and expand access to affordable home loans.
Lower Transaction Costs Could Boost Market Activity
Reducing transaction costs is another area where policy intervention could help stimulate the sector.
Registration fees, stamp duties and other charges associated with the purchase and transfer of apartments and land remain significant costs for buyers.
Industry stakeholders believe that bringing these charges down to more reasonable levels could encourage more transactions. Higher market activity could subsequently expand the tax base and generate greater government revenue.
The real estate sector, they argue, should therefore be viewed not merely as a source of taxation but also as a major driver of investment, employment and broader economic activity.
State-Owned Land Could Support Affordable Housing
Another potential solution lies in putting underutilised state-owned land into productive use for planned housing development.
Through structured public-private partnerships (PPPs), the government could work with experienced developers to develop affordable housing projects targeting middle- and lower-income households.
Land acquisition currently represents a substantial portion of the cost of many housing projects. If the government provides land under appropriate PPP arrangements, developers could potentially deliver quality housing at significantly lower prices.
Such a model could simultaneously support affordable housing, planned urbanisation, employment generation and economic growth.
International experience shows that PPP-based affordable housing models can be effective when supported by appropriate regulations and long-term policy frameworks.
National Housing Policy Needed
Industry stakeholders also believe Bangladesh needs a comprehensive and long-term National Housing Policy to provide clear direction for the sector.
Such a policy could address affordable housing, mortgage financing, land management, urban planning, infrastructure development and housing access for low- and middle-income households.
The broader objective should be to establish a national vision of “Home for All”, recognising housing not only as an economic commodity but also as a foundation of dignity, social security and inclusive development.
Formalising Undeclared Funds Requires Careful Policy
The issue of bringing undeclared funds into productive investment has also drawn attention within the construction and real estate sectors.
Recent budget provisions allowing taxpayers to declare differences between deed values and actual transaction values could potentially channel some unaccounted funds into formal investment activities.
Similar measures introduced in the past have reportedly helped attract investment and generate additional government revenue.
However, industry observers caution that such policies need appropriate safeguards.
The tax structure should remain investment-friendly, as excessively high taxation could discourage the very investment the policy seeks to attract. At the same time, such measures should be considered transitional rather than a substitute for developing a fully transparent and compliant investment environment.
CPDL Expands Beyond Traditional Real Estate
Amid the challenging market conditions, Chattogram-based real estate company CPDL is pursuing a broader business strategy that goes beyond traditional apartment development and sales.
The company says its focus is increasingly centred on lifestyle, community development and long-term value creation.
Its residential and mixed-use projects in Dhaka and Chattogram are progressing, with around 50 projects currently under construction, according to the company.
Despite difficult market conditions, CPDL says it remains focused on maintaining project delivery schedules and quality standards, viewing customer trust as one of its most important long-term assets.
The company is also exploring income-generating and investment-linked models that could allow customers to participate in broader value creation rather than simply purchasing property.
Focus on Property Management and Digital Transformation
CPDL is simultaneously increasing its focus on property management, customer service, digital transformation and operational efficiency.
One of its major upcoming developments is Mall of Chattogram, which is being positioned as a large-scale destination mall aimed at reshaping retail, family entertainment and lifestyle experiences in Chattogram.
The company is also expanding into hospitality and serviced living through initiatives such as Galleria – Your Second Home, which it views as an extension of its broader real estate ecosystem.
Future of Real Estate Expected to Be Greener and Smarter
The future direction of Bangladesh’s real estate industry is expected to be increasingly influenced by sustainability, technology and community-focused development.
Developers are placing greater emphasis on solar energy integration, smart building systems, energy-efficient designs and enhanced property management services.
Industry observers believe the current slowdown could ultimately serve as a period of structural adjustment rather than simply a market downturn.
With appropriate policy support, lower financing costs, stronger consumer confidence, technological innovation and long-term planning, Bangladesh’s real estate sector has the potential to emerge more resilient and sustainable.
For developers such as CPDL, the challenge is increasingly shifting from simply constructing buildings to creating integrated communities, improving lifestyles and generating long-term value for property owners and investors.
