Rapid and unplanned infrastructure development has tremendous impacts on land use and land cover dynamics; in particular, large-scale infrastructure projects reshape the peri-urban and rural landscapes in rapidly urbanizing regions of Bangladesh. The construction of the Karnafuli Tunnel bisected Bairag, a peri-urban union of Bangladesh, into two segments, potentially triggering a drastic impact on the LULC modifications and economic shifts. This study intends to investigate the nexus between LULC change, land price dynamics, and urban densification in Bairag over time, showcasing the impact of the crucial changes. At two-year intervals, Landsat 7 SR (2008–2012), Landsat 8 (2014), and Sentinel-2 (2016–2024) data were extracted to prepare supervised LULC maps of Bairag, which were classified into seven categories over 200 training signatures per class using Google Earth Engine, and a Kappa value >0.85 was achieved, denoting strong classification accuracy. The finding reveals an increase of more than three times in built-up areas, while the vegetation and agricultural lands decreased by 50% and 18%, respectively, in 2024 compared to 2008. Moreover, change detection maps were generated through pixel-by-pixel comparison of consecutive LULC maps, which eventually produced transition matrices to quantify land cover conversions, indicating stable pre-tunnel land dynamics and accelerated urban expansion and abrupt changes in the later years. Later, built-up zones extracted from supervised LULC maps were investigated through a sector-based buffer ring method, showing 500 m concentric rings and directional sectors from a predefined center to determine urban expansion in Bairag over the years. The urban densification toward the east and southeast directions was predominant, depicting the increase in areas by 123 and 111 times, respectively, indicating radial urban growth. Even the land price dynamics and built-up expansion indicated significant positive correlations. This study will contribute to sustainable land use planning, infrastructure governance, and equitable development strategies in rapidly transforming cities like Chattogram.