SANTO DOMINGO – Building in the Dominican Republic remains an attractive investment opportunity, but it is becoming increasingly demanding from a financial perspective. The sustained increase in direct costs, the high interest rate environment, and the pressure on material prices are transforming the structure of the real estate business.
At the close of 2025, the direct costs to build a home registered an accumulated increase of 3.72% , reflecting the gradual increase in the cost of inputs and components associated with the sector, according to the Dominican Association of Housing Builders and Promoters (ACOPROVI), with data from the National Statistics Office (ONE).
The Direct Housing Construction Cost Index (ICDV) reached an average of 236.17 points, standing 8.49 points above the level observed in 2024, a clear sign that the structural cost of developing housing continues to rise.
Meanwhile, the Central Bank reported that construction sector activity showed a year-on-year variation of -2.3% in the first half of 2025, mainly explained by a context of international economic uncertainty and relatively high real interest rates, factors that have led to the postponement of private works and a lower demand for housing.
The cost of construction no longer depends on a single variable, but on a set of macroeconomic and sectoral forces that are redefining the profitability of projects.
An index at historically high levels
The cost of building homes remains high even with occasional adjustments. The National Statistics Office (ONE) documented that the Housing Cost Index (ICDV) reached its highest level in the last six years in January 2025, averaging close to 235 points. Since December 2024, the index had accumulated an increase of 3.46% , demonstrating a persistent trend rather than an isolated event.
This behavior directly impacts access to housing and the financial viability of new developments, especially in segments where the margin depends on the stability of the cost per square meter.
Materials: the main driver of the price increase
Materials continue to top the list of components that exert the most pressure on costs. The ONE bulletin identified significant increases in products such as wire, nails, and zinc (9.70%), in addition to increases in electrical fittings. When these inputs—critical to the construction structure—become more expensive, the impact is quickly reflected in the overall project budget and, subsequently, in the final price of the home.
For the developer, this implies greater working capital needs and a more conservative calculation of expected profitability.
Interest rates: the invisible cost of development
Financing has become another determining factor. The Central Bank attributes part of the sector's recent performance to an environment of high real interest rates , which has led to a more gradual implementation of private projects.
Paradoxically, credit for housing construction and acquisition reached RD$581,151.7 million between January and June 2025, a 14.3% increase compared to the previous year, demonstrating that the demand for financing remains active, albeit more expensive. This scenario puts pressure on the financial structure of developments: money continues to flow, but at a higher price.
The combined effect on construction activity
The context of high interest rates, lower demand, and public spending below the historical average has influenced the sector's dynamics, according to the Central Bank. In practical terms, this translates into more cautious investment decisions and longer construction schedules, two factors that can alter a project's expected return. Construction, traditionally seen as a barometer of the economic cycle, is beginning to reflect a more selective environment.
Single-family homes and apartment buildings are also feeling the pressure
Data from the ONE shows that the price increase has been widespread. In 2025, the costs associated with single-family homes on one level rose by 4.36% , while those on two levels increased by 3.57% . Apartment buildings were also affected by this trend: four-story buildings saw a 3.49% , and those with eight or more stories rose by 3.45% year-on-year. This suggests that cost pressures do not discriminate between building types and affect both vertical and horizontal development.
More than an increase: a structural change in the business
The evidence suggests that the rising cost of construction in the Dominican Republic is not a temporary shock, but rather a deeper transformation of the real estate landscape. More expensive materials, demanding financing options, and recently record-high direct costs are forcing developers to rethink their strategies, from product design to speed of execution.
For investors, the message is clear. The Dominican market maintains solid fundamentals and access to credit, but the margin for error is shrinking. Going forward, profitability will depend less on the cyclical nature of the market and more on the ability to anticipate costs, structure financing, and build efficiently. Because in the new landscape of Dominican real estate, it's not just where to build that matters, but also how much it costs to do so and how sustainable that cost is over time.
Recommended readings:
