Why SBP Is Holding Interest Rates at 11% Despite Market Expectations: What Property Buyers Need to Know

State Bank of Pakistan Governor Jameel Ahmad delivered a message on October 7, 2025 that surprised many market participants: future interest rate cuts depend entirely on the outcome of the ongoing IMF review and the economic impact of catastrophic floods that killed over 1,000 people and displaced 4.2 million. With the Monetary Policy Committee meeting scheduled for October 27, the central bank's "very cautious" stance creates uncertainty for property buyers evaluating apartments on installments Bahria Town or considering mortgage financing for ready apartments Bahria Town Karachi.

The Rate That Didn't Move

The SBP has maintained its policy rate at 11% since mid-2025, marking three consecutive meetings without adjustment. This stability follows dramatic cuts from a peak of 22% during Pakistan's recent inflation crisis, when the central bank aggressively raised rates to combat price pressures that threatened economic stability.

Market expectations told a different story. According to Graana.com's 2025 real estate outlook published earlier this year, analysts anticipated interest rates dropping to single digits by mid-2025, with the reduction expected to stimulate property sector activity significantly. Industry executives predicted money would flow out of banks and into real estate once rates fell to more attractive levels.

Those predictions haven't materialized. Instead, the SBP maintains its cautious posture despite inflation falling to 3% in August 2025—well below the central bank's 5-7% target range. The disconnect between market expectations and policy reality creates questions for anyone evaluating easy monthly installments apartments Karachi or traditional mortgage products.

Why the IMF Review Matters

The IMF dimension adds complexity that many property buyers overlook. Pakistan's $7 billion loan program includes conditions and performance targets that influence domestic policy decisions, including monetary policy stance. The ongoing second review examines whether Pakistan meets these conditions, and the outcome directly affects the SBP's willingness to cut rates further.

According to ProPakistani, Governor Ahmad explicitly linked future rate cuts to the IMF review outcome, signaling that the central bank cannot move independently regardless of domestic inflation data. This external constraint creates uncertainty that traditional monetary policy analysis doesn't capture.

For buyers considering apartments under 50 lakh Bahria Town through developer financing rather than bank mortgages, this IMF connection matters less directly. Developer payment plans operate independently of SBP policy rates, creating an alternative financing channel that sidesteps monetary policy volatility.

The Flood Factor

The September 2025 floods that killed over 1,000 people and damaged approximately 8% of cropped land introduce supply-side inflation risks that complicate rate decisions. Even with overall inflation at 3%, food price pressures from agricultural damage could temporarily push inflation above the SBP's 5-7% target range in early 2026.

This creates a policy dilemma: cut rates to stimulate economic recovery from flood damage, or maintain rates to prevent inflation from accelerating as supply shocks work through the system? The SBP's decision to prioritize price stability over near-term stimulus reflects this difficult trade-off.

The real estate implications are nuanced. Property markets typically benefit from lower rates through cheaper financing and increased buyer capacity. However, inflation spikes from food price pressures reduce purchasing power and can shift consumer priorities away from major purchases like property toward essential goods.

For those evaluating 2 bedroom apartments Bahria Town in completed developments, this policy uncertainty reinforces the value of immediate possession. Ready properties generate rental income or eliminate rent expenses regardless of future rate movements, while under-construction projects expose buyers to potentially extended timelines if economic uncertainty slows development activity.

What 11% Actually Means

Context matters when evaluating the current rate. At 11%, Pakistan's policy rate remains elevated compared to regional economies and historical domestic norms, but dramatically lower than the 22% peak reached during recent inflationary pressures. This middle-ground positioning reflects the SBP's view that significant progress has been made but vigilance remains necessary.

For property buyers, 11% translates to mortgage rates typically ranging 13-15% including bank spreads and charges. These rates make mortgage financing considerably more expensive than developer installment plans on best apartments in Bahria Town Karachi, where payment structures often include zero or minimal interest components designed to facilitate sales.

The rate differential creates distinct market segments. Bank-financed buyers prioritize immediate possession and established properties where resale markets provide exit options. Developer-financed buyers accept construction risk in exchange for more favorable payment terms that don't fluctuate with SBP policy decisions.

The October 27 Wildcard

The next MPC meeting on October 27 carries unusual uncertainty. Market participants widely expect the SBP to maintain the 11% rate pending IMF review outcomes, but flood impacts and evolving inflation data could surprise either direction. A rate cut would boost sentiment and potentially accelerate property transactions. A rate hold would reinforce the cautious stance and likely extend the current market equilibrium.

Governor Ahmad's October 7 comments emphasizing caution suggest the latter outcome seems more probable, but monetary policy decisions often respond to rapidly changing circumstances. External funding risks, fiscal coordination challenges, and economic growth trajectories all factor into decisions that transcend simple inflation targeting.

For buyers evaluating luxury apartments with security Karachi with completion timelines extending into 2026, the policy uncertainty argues for securing financing terms now rather than waiting for potentially better rates that may not materialize on expected timelines.

Developer Financing as Rate Hedge

One often-overlooked implication of monetary policy uncertainty: developer installment plans provide natural hedging against rate volatility. When buyers commit to apartments on installments Bahria Town with fixed payment schedules, they lock in financing costs regardless of subsequent SBP policy changes.

This contrasts sharply with variable-rate mortgages or even fixed-rate products with relatively short lock periods. Developer plans offering 2-3 year payment schedules with fixed installments eliminate the risk that rising rates increase carrying costs mid-transaction.

The hedge works both directions. If rates fall significantly, developer-financed buyers miss opportunities to refinance at lower costs. However, the SBP's cautious stance and IMF constraints suggest rate stability rather than dramatic cuts represents the more likely scenario through 2026.

Conclusion: Policy Uncertainty as Investment Factor

The SBP's October 7 message—future rate cuts depend on IMF reviews and flood impacts—injects uncertainty into property financing decisions that many buyers underestimate. The October 27 MPC meeting may provide clarity, but the Governor's cautious tone suggests patience rather than aggressive easing represents the central bank's medium-term stance.

For property buyers, this environment reinforces several principles: prioritize ready apartments Bahria Town Karachi offering immediate value over speculative under-construction exposure; consider developer financing alternatives to bank mortgages vulnerable to policy volatility; and evaluate properties based on current affordability rather than hoped-for rate reductions that may not materialize on expected timelines.

Monetary policy remains just one variable among many affecting property decisions, but understanding the SBP's cautious October stance provides context for financing strategies that account for realistic rate trajectories rather than optimistic projections that market conditions may not support.

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Sources:

• ProPakistani.pk: SBP Links Future Interest Rate Cuts to IMF Review Outcome (October 7, 2025)
• ProPakistani.pk: SBP Keeps Key Interest Rate Unchanged (September 15, 2025)
• Graana.com: Pakistan's Real Estate Outlook for 2025