This paper develops and analyses a population density-dependent mathematical model to study the transmission dynamics of COVID-19 in crowded settlements such as refugee camps, schools, markets and churches. The model quantifies the potential impact of physical/social distancing and population density on the disease burden. It further determines the number of secondary infections that may arise from having one infectious individual in a high population-activity area. Results reveal that with no fatalities, the reproduction numbers associated with asymptomatic and symptomatic cases are inversely proportional to; the habitat area size, and the efforts employed in tracing and hospitalising these cases. The critical habitat area below which the disease dies out is directly proportion to the time taken to identify and hospitalise infected individuals. Results also show that disease persistence in the community is guaranteed even with minimal admission of infected individuals. In a high-activity area with 70,000 individuals, results indicate that if 10% of these individuals do not adhere to standard operating procedures (SOPs) when allocated an area of 1m2 per individual, then every infectious seeder will cause approximately one new infection within 12 hours of activity. On the other hand, if the area occupied by the 70,000 individuals is increased to 1km2 then even at the lowest explored level of adherence to SOPs, the arising number of new cases within 12 hours would be less than one per infectious seeder. We conclude that proper use of masks and physical distancing measures should be highly enforced in crowded settings.