6-Month KIBOR Hits 3-Year Low in 2025: How Inflation Slowdown Creates Opportunities for Real Estate Investors

6-Month KIBOR Hits 3-Year Low in 2025: How Inflation Slowdown Creates Opportunities for Real Estate Investors

 

According to data released by the State Bank of Pakistan as of January 10, 2025, Pakistan's 6-M KIBOR has declined to a 3-year low at 11.89%.

This reflects a 111 basis points (bps) gap below the central bank's benchmark lending rate of 13%. Since the past 18 months, KIBOR has dropped to half from its peak of 24.68% as inflation has dropped sharply and the fiscal policies have eased.

Furthermore, the KIBOR rates for various tenures declined sharply in January. Such as 3 months with 21 bps, 6 months with 23 bps, 9 months with 31 bps, and 12 months with 26 bps. Such changes are shaping the new landscape of the economy. Meanwhile, they can impact the real estate investor most through the reduction in their borrowing cost.

Understanding the role of KIBOR in the economy

KIBOR (Karachi Inter-Bank Offered Rate) is the standard interest rate at which banks borrow it from one another. It is a strict indicator of the borrowing cost for businesses and the general public. Changes in this rate represent the general scenario of the economy like inflation or monetary policies. Thus, this present decrease in KIBOR reflects increased liquidity and lesser inflation, which is an ideal time to borrow.

Why slowdown in inflation is affecting KIBOR's fall

The fall in KIBOR is a result of a fall in inflation, which helps the SBP to soften their financial framework. Because of the lower inflation; there is the least burden on central banks to carry high interest rates. Furthermore, the loan takers can benefit from it and get low-cost loans.

What 3-Year KIBOR Trend Tells Investors

KIBOR has decreased to the present level of 11.89% from its high of 24.68% in mid-2023. It is a great shift in the financial landscape. This three-year low trend offers many advantages for investors, especially for real estate investors. Hence, it brings down the cost of financing and increases affordability.

Opportunities for Real Estate Investors

Lower KIBOR rates typically benefit the real estate sector. Due to loans at a lesser cost, a buyer would get easier access to purchasing the property. This is also perceived as low finance costs for project developments across all cities in Karachi, Lahore, and Islamabad.

For a long-term investor, this is a buying opportunity since he shall acquire high-value property at cheaper funding costs where the returns may be high as a bounce back of the market.

Analysts predict that KIBOR will not increase in 2025, because strong control on inflation supports it. This stability in inflation can sustain the increase in the real estate sector besides attracting investors to the country either locally or internationally.

Conclusion

In a nutshell, this present 6-M KIBOR is historically at a low level and marks a landmark moment for Pakistan’s economy. Borrowing in the nation is now put at its lowest friendly period in such long years. The real estate market of Pakistan longs for it, so at this low-interest time, investors should make their long-term investments.