Real estate sinks deeper into crisis as booking cancellations surge, defaults hit 26.7%

Bangladesh's real estate sector is facing one of its deepest downturns in recent years, marked by a wave of booking cancellations following the political shift on 5 August 2024, while rising construction costs, high interest rates, and global instability have pushed default loans in the sector to nearly 27%.

Industry insiders say the crisis is squeezing developers' cash flows, halting projects and threatening knock-on effects across dozens of connected industries.

According to developers, the primary reason for booking cancellations was that many investors and high-net-worth buyers either left the country or adopted a wait-and-see approach.

This sudden pullback has disrupted the advance-payment model that many developers rely on to finance projects.

Infographic: TBS

At the same time, global shocks – including the ongoing Russia-Ukraine and the Middle East wars – have driven up the cost of key construction materials such as steel, cement, and fuel, adding further pressure on developers.

Data from the central bank show the scale of the financial strain. Default loans in the real estate sector climbed to about 26.70% in 2025, a sharp rise from around 8% in 2022, reflecting mounting difficulties among developers.

According to industry insiders, both large and small firms are struggling to repay bank loans as sales have dried up and costs continue to rise.

Apartment sales have fallen steeply over the past two years. Industry estimates indicate that overall apartment sales dropped by 30-35% in 2024 compared with the previous year, with conditions deteriorating further in 2025.

Bookings for mid-range apartments in Dhaka have fallen by 20-25% year-on-year, while sales in the luxury segment have declined by as much as 50%. For many developers, monthly sales have dropped from five to eight units to just one or two.

"Only those with urgent needs are buying now. Most people are holding back due to economic and political uncertainty," said Mezba Uddin Maruf, director of Green Hat Real Estate.

His company currently has more than 30 ongoing projects in Dhaka, with around 200 unsold apartments, reflecting the broader slowdown in the market.

Smaller developers under pressure

The downturn has been particularly harsh for smaller developers, many of whom are struggling to keep projects afloat as revenues decline and costs increase.

Mohammad Ayub Ali, chairman of Oishi Properties, said several of his projects are facing serious difficulties.

"Our Rampura project is in trouble. Buyers who booked flats are not paying instalments, and we are unable to attract new customers," he said. "We have already exhausted our capital just to keep operations running."

A senior official at JCX Developments said about 10% of booked clients disappeared after the political transition, forcing the company to suspend work on some projects.

"Construction costs have increased significantly, and many customers are no longer interested in purchasing. As a result, a number of apartments remain unsold," the official said.

At Sheltech, one of the country's leading developers, roughly 25% of bookings have been cancelled since August, while new sales have dropped by 15-18%.

Managing Director Tanvir Ahmed said rising raw material costs and global supply disruptions have compounded the crisis.

"Steel and cement prices have increased sharply due to global instability, and local producers have reduced output. As a result, developers are forced to rely on the spot market at higher costs," he said.

However, despite a sluggish performance in FY2024-25, Rupayan Asset Limited has reported a modest rebound in business this year.

"Our sales have improved somewhat since the beginning of the year, and none of our projects is currently stalled," said Sabbir Hossain Khan, the company's chief executive officer.

He noted that raw material prices have risen due to the Iran-US conflict, but sales momentum remains steady. "The response is not bad, though it cannot be described as very strong either," he added.

Sabbir further said only highly compliant companies like theirs are performing well in the current market, while small and medium-sized firms are struggling to sustain operations.

Meanwhile, despite weak demand, developers warn that the sharp decline in new project launches could eventually lead to a shortage of housing supply.

Mamunur Rashid, managing director of NZAC Design and Development, said political and economic uncertainty has slowed investment decisions across the sector.

"Many investors and buyers are holding back. New project launches have declined, which may create a supply shortage once the market stabilises," he said.

Construction, financing costs surge

Construction costs have risen by around 25%, driven by higher prices for materials such as steel and cement, as well as regulatory changes including the Detailed Area Plan (DAP).

Market visits show cement prices have increased to Tk520-550 per bag, up from Tk480-520 previously. Rod prices have climbed to Tk105,000-108,000 per tonne, compared with below Tk80,000 earlier.

The situation in the steel market has worsened further. Prices of mild steel (MS) rods have increased by as much as Tk20,000 per tonne in the past two months, industry insiders said.

Traders said demand has picked up after months of slowdown, while manufacturers pointed to rising scrap prices both globally and locally. Despite adequate supply, rod producers have raised prices, with different grades seeing sharp weekly increases in major markets.

Industry players link the price rise to disruptions in global supply chains and higher shipping costs tied to tensions in the Middle East and rising oil prices.

Developers also say access to bank financing has become more difficult as interest rates rise and liquidity pressures deepen in the banking sector.

"Developers have taken large loans, but projects are now stalled midway. Interest costs are mounting, creating a vicious cycle," said a senior executive at a leading firm.

According to industry data, default rates have been rising steadily over the past five years, climbing from around 7-9% in 2022 to 26.70% in 2025, driven by declining recovery rates and a growing volume of overdue loans.

Ripple effects across the economy

The real estate sector contributes about 8% of Bangladesh's GDP and directly supports an estimated 3.5 million jobs, with links to more than 250 industries, including steel, cement, ceramics and transport.

The current slowdown is already sending shockwaves through these sectors.

Steel manufacturers alone reported losses of around Tk3,500 crore in the past three months, while cement producers have also experienced a sharp fall in demand.

With construction activity slowing and major infrastructure projects stalled, industry insiders say nearly 90% of cement factories are operating below capacity or have suspended production.

Liakat Ali Bhuan, vice-president of the Real Estate and Housing Association of Bangladesh (REHAB), called for urgent policy support, including the creation of a Tk3,000 crore special fund to help developers complete ongoing projects.

Industry leaders also urged the government to introduce low-interest, long-term housing loans for middle- and lower-middle-income buyers and to simplify loan approval procedures.

Some stakeholders further said allowing investment of undisclosed money (black money) in the sector could also help revive demand in the short term.