Most of the cities in developing countries are built on filling wetlands and are also being expanded using continuous land filling and embankments. In coastal areas, cities are doubly threatened as this water is also saline. This paper used these backgrounds to understand how the urban land market is responding to such disasters in a coastal city of Bangladesh. The paper used spatial econometric analysis with GIS data along with a household survey data. In terms of policy prescription, the study reveals that a parcel of land which is water-logged for a day drops its value by 6%; for 2 days drops it by 8% and for 3 days the value drops by 9% and so on. A public investment to remove water-logging increases the value by 14%, so it is possible to invest to reduce the impact and this can be partially financed by higher taxation of land value gains.