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SBP Raises Policy Rate to 11.5% as Middle East Tensions Fuel Price Pressures

On Monday afternoon, Pakistan’s central bank changed a number that touches nearly every aspect of economic life in the country, from car loans to factory financing. The State Bank of Pakistan (SBP) raised its policy rate by one full percentage point, from 10.5% to 11.5%, effective April 28, 2026. It was the first rate hike in nearly three years, and it caught most analysts off guard.

What Is the Policy Rate, and Why Does It Matter?

Think of the policy rate as the master dial controlling the cost of money in the economy. When the SBP raises it, commercial banks charge more on loans for homes, businesses, and cars. The idea is that pricier credit discourages excessive spending, which in theory slows inflation. When it cuts rates, borrowing gets cheaper, and the economy is nudged to grow faster.

What Prompted This Decision?

The SBP pointed squarely at the ongoing Middle East conflict. The war has pushed up global oil prices, raised freight charges for ships, and increased cargo insurance premiums. For Pakistan, a net energy importer, these translate directly into higher fuel, transport, and electricity costs at home.

Inflation, measured by the Consumer Price Index, stood at 7.3% in March 2026, reflecting moderate but persistent price pressures. Core inflation, the stickier, underlying measure that excludes volatile food and energy, climbed to 7.8%. Both were trending in the wrong direction.

The MPC’s own assessment was stark: the current supply shock may push inflation to double digits in the coming months, and it is expected to stay above the 5–7% target range for most of FY27. The SBP decided that waiting would be riskier than acting early.

Why Were Analysts Surprised?

Economists were divided over the SBP’s 100 bps rate hike, reflecting a broader debate over whether interest rates are the right tool for a supply-driven inflation shock.

Dr. Khaqan Najeeb, former adviser to the Ministry of Finance, called it “a strong pre-emptive response to a classic external supply shock,” but said the size of the move appeared high. In his view, a smaller increase may have sent the same signal while preserving policy flexibility.

That signalling effect is important: central banks raise rates not only to cool demand, but also to shape expectations and discourage businesses and workers from assuming inflation will keep rising.

Dr. Ashfaque Hasan Khan disagreed more strongly, arguing that the inflation pressure was not demand-led: “The rising prices are not due to excessive demand. They are primarily caused by increasing oil prices and supply chain disruptions, factors over which we have no control. The shock is coming from the supply side, for which interest rate is not an ideal policy instrument.”

He also warned that higher rates would raise the government’s borrowing costs and worsen fiscal pressure, adding, “Since we had committed to the IMF in the last review, we had to increase the interest rate. This has nothing to do with Pakistan’s current economic fundamentals.”

The Bigger Picture

Pakistan’s economy has been in recovery mode. Real GDP grew 3.8% in the first half of FY26, compared to just 1.9% in the same period a year earlier, while the current account posted a small surplus during July–March, supported by resilient workers’ remittances. 

FX reserves stood at around $15.8 billion as of April 24, with the SBP projecting a rise above $18 billion by June 2026, partly buoyed by a Eurobond issuance, Pakistan’s first return to international capital markets in over four years.

The less comfortable side: tax collection fell short of target by Rs 611 billion through March, and GDP growth for FY26 is now expected at the lower end of the projected range.

What It Means in Practice

Higher rates mean more expensive loans across the board. Small businesses relying on bank credit will feel the squeeze most. Savers, on the other hand, typically earn better returns when rates rise. For the government, servicing Pakistan’s large domestic debt becomes costlier, adding pressure to an already strained budget.

What to Watch Next

The next MPC meeting in June coincides with the federal budget, making it one of the most consequential economic moments of the year. If Middle East tensions cool and oil prices ease, the case for further hikes weakens, and cuts could return sooner than expected. If the conflict deepens, more tightening cannot be ruled out.

The clearest indicator to watch is core inflation. If it stabilises over the coming months, the rate hike is doing its job. If it keeps rising despite higher borrowing costs, it would suggest the real problem lies beyond the reach of monetary policy in global commodity markets and fiscal decisions that only the government can make.

For more news on real estate and Special Reports, visit Chakor Ventures.

Citations

CategoriesEconomy Feature Article Investment Property Property Laws Property Taxes Real Estate

FBR Updates Property Valuation in Six Cities, Adopts Selective Revision Strategy

The Federal Board of Revenue (FBR) has revised property valuation rates in six cities through notifications issued in April 2026.

Type Location Published Source
Feature Report Islamabad, Multan, Faisalabad, Gujranwala, Bahawalpur, Sialkot April 2026 Federal Board of Revenue (FBR)

In a move that underscores a more cautious and data-driven approach to taxation, Pakistan’s Federal Board of Revenue (FBR) has revised property

valuation rates in six key urban centers, choosing precision over sweeping change.

6 cities revised  Targeted update

Up to 35% cut  in Islamabad

Up to 40% increase  in select Punjab areas

The latest notifications, issued through multiple statutory regulatory orders (SROs), affect Islamabad and five major cities of Punjab: Faisalabad, Multan, Gujranwala, Bahawalpur, and Sialkot. Yet unlike past revisions that triggered widespread market reactions, this update is defined by restraint.

Officials describe the exercise not as a revaluation, but as a “calibration.”

What the revision shows

A review of the notifications suggests three broad trends.

Islamabad

First, Islamabad has seen the clearest downward adjustment in a number of areas, especially when compared with earlier public discussion around high official values in the capital. The Islamabad notification provides a fresh sector-wise table with rates for open plots, apartments, and different commercial categories, showing wide variation by location. 

For example, it lists residential open-plot values such as Rs21,000 per square yard in B-17, Rs91,000 in D-12, Rs225,000 in F-7, and Rs200,000 in F-8, showing a more differentiated capital-city structure than a flat city-wide pricing approach. 

It also sets separate built-up values for superstructure based on age: Rs2,500 per square foot for structures up to five years old and Rs1,200 per square foot for older structures.

Multan and Faisalabad

Second, Multan and Faisalabad show upward movement in selected urban and developed areas. The Multan notification replaces a long list of entries from the 2024 schedule and gives revised open-plot values for areas such as Wapda Town, Gulgasht, Abdali Road, Bosan Road and other city locations. 

In the examples visible in the revised table, many residential and commercial entries in developed city areas are set at higher nominal levels than would normally be associated with lower-tier urban zones, indicating an upward update in important corridors and neighborhoods.

Faisalabad’s revised entries likewise show updated values for city housing and metropolitan corporation areas, including residential and general classifications in areas such as FDA City, city housing zones, and other listed blocks, pointing to a selective upward revision rather than a broad-based cut.

Gujranwala, Bahawalpur, and Sialkot

Third, Gujranwala, Bahawalpur and Sialkot appear to have more limited and focused changes, mainly in named housing schemes, DHA-related sectors, commercial plots, residential plots, and built-up categories. 

In Bahawalpur, for example, the amendments cover DHA-developed sectors and named villa and commercial projects, with separate plot and superstructure values. 

In Gujranwala, the changes cover selected entries in Defence Housing Scheme, GEPCO Town, Palm City Housing Society, Royal Palm City and other specific locations. 

In Sialkot, the notification is short and updates selected named schemes such as Canal City, City Villas Housing Society Harar, Daimond City, Dream Land City, Golden City, Model City, Quba City, Safe City Housing Scheme, Sialkot City and Silk City.

City-wise direction of change

Because the notifications revise selected entries rather than publishing a single city-wide percentage, the best way to present the trend is as an overall directional estimate based on the updated categories and areas listed in the SROs:

City Previous Valuation Level (2024) Revised Valuation Level (2026) Estimated Overall Shift General Market Reading
Islamabad 100% baseline about 65% to 90% of the earlier level in affected areas -10% to -35% downward correction in a number of sectors
Faisalabad 100% baseline about 110% to 125% in affected areas +10% to +25% moderate rise in selected urban areas
Multan 100% baseline about 115% to 140% in affected areas +15% to +40% stronger rise in key city zones
Gujranwala 100% baseline about 100% to 110% in affected areas 0% to +10% limited upward change
Bahawalpur 100% baseline about 110% to 120% in affected areas +10% to +20% controlled increase in selected schemes
Sialkot 100% baseline about 105% to 120% in affected areas +5% to +20% gradual increase in updated schemes

NOTE: These percentage bands are descriptive estimates drawn from the pattern of revised entries in the notified tables. The notifications themselves list area-specific values rather than a single city-wide percentage.

Impact on Buyers

For real estate buyers, FBR valuation is important because it affects the documented value used for tax purposes at the time of purchase. When the official valuation of a property rises, the tax burden tied to that documented value can also rise. When the official valuation falls, the tax cost attached to the transaction can become lighter. 

The practical effect is that buyers are not only concerned with the seller’s asking price or the market price; they are also affected by the official value assigned to the property in the FBR schedule. The notifications, therefore, matter directly for transaction planning, affordability, and the total upfront cost of buying.

Islamabad Property Market: Lower FBR Valuations May Ease Buyer Costs

The latest revision shows a downward trend in FBR property valuations in Islamabad, which could offer some relief to buyers in affected sectors.

Lower official values can help buyers in two key ways:

  • Reduced transaction taxes: Since taxes are linked to FBR valuation, a lower benchmark can decrease overall documentation costs.
  • Closer alignment with market prices: In some areas, the gap between official value and actual market price may narrow, making deals easier to negotiate.

However, this does not necessarily mean property prices will fall. Market prices are still driven by demand, location, and supply. What changes is the cost of registering and transferring property, which becomes more manageable.

This is particularly important for:

  • middle-income buyers
  • salaried individuals
  • first-time homebuyers

These groups are more sensitive to transaction costs, so even moderate reductions in official valuation can improve affordability.

Multan and Faisalabad: Higher Property Valuations May Increase Buyer Entry Costs

In contrast, FBR valuation increases in Multan and Faisalabad suggest higher entry costs for buyers, especially in developed and high-demand areas.

For properties located on main roads, in established housing societies, or in well-serviced neighborhoods, buyers may now face higher tax-linked costs at the time of purchase.

Key effects on buyers

  • Higher upfront costs: Buyers need to budget not only for the purchase price but also for increased taxes and documentation charges.
  • Pressure on affordability: Budget-conscious buyers may shift toward smaller plots or less expensive areas.
  • More location comparison: Differences in valuation between nearby areas may influence buying decisions more than before.
  • Potential slowdown in mid-range segments: Higher costs can reduce demand, especially where buyers are price-sensitive.

Overall, these changes may make the market more selective, with buyers focusing on value-for-money locations.

Gujranwala, Bahawalpur, and Sialkot: Limited Changes, Targeted Impact on Buyers

In Gujranwala, Bahawalpur, and Sialkot, the revisions are more limited and focused on specific housing schemes and property types. As a result, the impact on buyers is selective rather than widespread.

City-wise impact

  • Bahawalpur: Increased valuations in DHA sectors, villa communities, and commercial units may raise costs for buyers in premium planned developments.
  • Gujranwala: Modest increases in areas like Defence Housing Scheme, GEPCO Town, and Palm City may slightly raise transaction costs in organized housing projects.
  • Sialkot: Changes are concentrated in named housing societies such as Canal City, Model City, and Dream Land City, meaning the impact depends on the specific project.

What this means for buyers

  • No broad market-wide price pressure
  • Cost changes limited to specific schemes
  • Greater impact in well-developed or high-demand projects

For most buyers, the key takeaway is that location and project selection now play an even bigger role in determining total purchase cost.

Overall Buyer Impact: More Selective, Location-Based Decisions

Across all six cities, the revised FBR valuations make one thing clear: buyer costs are becoming more location-specific.

  • In some cities, lower valuations improve affordability
  • In others, higher valuations increase entry costs
  • In many cases, the impact depends on the exact housing scheme or sector

As a result, buyers are likely to:

  • Compare areas more carefully
  • Factor in both market price and official valuation
  • Prioritize total transaction cost, not just property price

This shift may lead to a more informed and selective buyers’ market in the coming months.

How the buyers’ market may respond

The revised valuations could shape buyer behavior in several ways over the coming months.

A. Greater interest in areas where official values have been reduced

Where official values move down, buyers may return to segments that had become costly to document. This could be particularly relevant in Islamabad, where revised valuations may encourage genuine residential demand in sectors where the official benchmark had become a hurdle.

B. Shift toward secondary locations in cities with upward revisions

In cities where official values have risen, some buyers may begin comparing notified localities more closely and shift toward less expensive zones. This is especially likely in Multan and Faisalabad, where stronger revisions in key areas may make nearby lower-rated localities more attractive.

C. Better transparency for serious buyers

Even though higher valuations can increase cost, a more detailed and area-based system can improve predictability. Buyers can more easily estimate the official basis on which their transaction will be documented if the schedule clearly identifies the area, road location, residential or commercial classification, and unit of measure. In that sense, a more detailed valuation schedule may help serious buyers plan better, even if it does not always reduce cost.

Expert Analysis and Industry Views

Early stakeholder reaction, primarily to the Islamabad valuation revision (S.R.O. 644(I)/2026)has been largely positive, with business leaders describing it as a corrective step.

Sardar Tahir Mehmood, President of the Islamabad Chamber of Commerce and Industry (ICCI), said:

“Earlier inflated valuations had created hurdles for genuine investors and contributed to a slowdown in property transactions. The new notification reflects a pragmatic approach by the FBR to rationalise property valuations in line with prevailing market conditions.”

ICCI Senior Vice President Tahir Ayub added:

“The revision would ease financial pressure on traders and industrialists who have been facing difficulties due to high taxation, thereby reviving business confidence and promoting investment in the real estate and construction sectors.”

What buyers should pay attention to now?

The revised notifications suggest that buyers should look at more than just market price before finalising a deal. A careful buyer now needs to confirm:

  • whether the property falls in an area specifically revised by the 2026 SRO;
  • whether it is residential, commercial, apartment, flat, shop or built-up property;
  • whether road-facing status or plot size changes the notified value;
  • whether superstructure value applies separately, as in Islamabad and some scheme-based entries;
  • and whether the scheme or sector is among the named entries that were substituted in the latest notifications.

These details can change the official value materially, which in turn can affect the transaction cost.

Overall Assessment

The FBR’s 2026 revision is a targeted adjustment, with reductions in parts of Islamabad and selective increases in several Punjab cities.

For buyers, the impact is mixed. Lower valuations can reduce transaction costs and improve affordability, while higher valuations in key areas may raise entry costs and make buyers more selective.

Overall, the update increases the importance of location-specific valuation, meaning buyers are more likely to compare total costs across areas. In the short term, this may lead to cautious buying, while over time it could help align official values more closely with market prices.

For more news on real estate and Special Reports, visit Chakor Ventures.

CategoriesEconomy Feature Article Investment Property Laws Real Estate

From 3% to 1%: How CDA’s New Fee Policy Could Reshape Real Estate

The CDA has cut the property transfer fee from 3% to 1% reversing a move that quietly stalled one of Pakistan’s most active urban real estate markets.

Type Location Published Sources
Feature Report Islamabad, Pakistan April 17, 2026 The News International, Dawn, The Express Tribune

For anyone who has ever tried to transfer a property in Islamabad, the process is familiar: paperwork, queues, challans, and at the end of it, a fee that eats a meaningful chunk out of the deal. For nearly nine months, that fee stood at 3% of the government-assessed property value, a rate that many buyers and sellers quietly called the last straw. On April 9, 2026, the Capital Development Authority (CDA) changed that. The transfer fee is now 1%.

It sounds like a small adjustment on paper. But for a market that had visibly slowed since mid-2025, this single decision may prove to be the most consequential policy move for Islamabad’s real estate sector in recent years.

How it got to 3% in the first place

To understand why this cut matters, it helps to go back to July 2025. That summer, the CDA revised its property transfer fee upward from 1% to 3% in a move aligned with updated Federal Board of Revenue (FBR) property valuations. On the surface, it seemed like a routine administrative update. In practice, it tripled the closing cost for every buyer in the capital.

The impact was immediate. A property previously attracting a transfer fee of Rs 35,000 suddenly carried a fee of Rs 105,000. Deal pipelines that were nearly closed began to stall. Buyers who had already arranged financing found themselves short. Sellers struggled to find willing buyers at the new all-in cost. Market volumes dropped quietly but steadily through the second half of 2025.

3× Fee increase in July 2025

9 Months Market slowed under a high rate

65%+ Drop in transfer cost from today

Meanwhile, the federal government had been moving in the opposite direction. The FY2025-26 Budget had reduced advance property tax from 3% to 1.5% a signal that Islamabad’s CDA policy was running against the national grain.

Trade bodies began making noise. The Islamabad Chamber of Commerce and Industry, the Islamabad Estate Agents Association, and the United Business Group all formally called for a reversal.

The new chairman, a new approach

In early April 2026, Sohail Ashraf took charge as CDA Chairman. He also holds the office of Chief Commissioner of Islamabad a combination of roles that gives him significant authority. His third board meeting, held on April 9, produced the reversal the market had been waiting for.

The philosophical shift was as notable as the numbers. Ashraf stated explicitly that the goal going forward would be to broaden the tax base rather than increase tax rates. In other words, CDA would rather collect smaller amounts from more people and more transactions than squeeze harder from a shrinking pool.

“Instead of increasing property taxes in Islamabad, efforts should be made to broaden the tax base.”

— Sohail Ashraf, Chairman CDA and Chief Commissioner Islamabad

The CDA Board formally approved the new rate and issued the official notification on the same day. It supersedes the previous notification dated July 1, 2025. All revenue departments were directed to apply the 1% rate immediately.

What the numbers actually look like

The fee is calculated on the FBR-notified (assessed) value of the property not the open market price. This distinction matters. FBR assessments are typically lower than what properties actually trade for on the market. So the real saving is often larger than even a two-thirds reduction implies.

FBR-assessed value Old fee @ 3% New fee @ 1% Saving
Rs 5,000,000 Rs 150,000 Rs 50,000 Rs 100,000
Rs 10,000,000 Rs 300,000 Rs 100,000 Rs 200,000
Rs 20,000,000 Rs 600,000 Rs 200,000 Rs 400,000
Rs 50,000,000 Rs 1,500,000 Rs 500,000 Rs 1,000,000

The new rate applies to all properties within CDA-controlled areas of Islamabad residential sectors such as F-8, G-10, and I-8, as well as commercial areas, including the Blue Area. It does not apply to properties in housing societies outside the CDA jurisdiction.

How beneficial this is for the market

High transfer fees do more damage than just raising costs. When the official route becomes too expensive, informal shortcuts become tempting. Transfers get delayed or, worse, go undocumented.

Ownership records fall out of date. Future disputes over inheritance, resale, or financing become more complicated. Every informal shortcut is a hairline fracture in the property market’s long-term integrity.

Lower fees reverse that incentive. When the official cost is reasonable, there is simply less reason to cut corners. More documented transactions mean better price discovery because verified deals build the official data trail that the entire market relies on.

“This decision will increase business activity, restore public confidence, and help the real estate sector, along with its allied industries, regain momentum.”

— Zafar Bakhtawari, Secretary General, United Business Group

For buyers, the benefit is immediate: lower upfront cost and less last-minute financing pressure near closing. For sellers, it widens the pool of serious buyers. For developers, it reduces the cost of moving inventory.

And, in what many analysts called a counterintuitive but well-established effect, CDA itself may collect more revenue, not less, because more transactions will now be completed formally and on record.

Beyond the fee what else was decided

The April 9 board meeting was not only about the transfer fee. Two other significant decisions were also taken.

The CDA board approved the appointment of Creative Consultants, designated as a City Curator, to help develop Islamabad as a cultural and tourism destination. The initiative covers landscaping, parks, green belts, and urban vibrancy a long-discussed ambition for the capital that has now moved from idea to formal procurement.

The board also addressed solid waste management. After reviewing recommendations from its own committees, it decided to terminate the current outsourcing procurement process and revisit successful models from other cities before restarting. The chairman described the goal as adopting a sustainable and efficient system rather than pushing through a flawed one.

What happens now

For buyers and sellers currently in the process of a property transfer, the practical guidance is straightforward:

  • Confirm your property falls under CDA jurisdiction
  • Verify with the dealing office that the 1% rate is being applied to your file.
  • Calculate on the FBR-notified value rather than the market price. Keep all receipts and the updated notification, which replaces the July 2025 circular.

It is also worth noting that the transfer fee is one part of the total closing costs. Other taxes and administrative charges still apply, depending on the transaction. The cut is significant, but it is not a removal of all costs.

What it is, however, is a signal. The new CDA leadership has chosen, in its first major policy move, to reduce rather than increase. In a market that has spent the better part of a year waiting for exactly that signal, the timing could not have been more deliberate.

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