Today sbp has cut the discount rate to 7%. This is the lowest level in 42 years. Will it have any significant impact on real estate prices in the country?
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Yes it will as people will take money out from accounts and will invest in different business and in Pakistan real state is the most easiest as u don’t need any infrastructure.
So should we expect a big jump in real estate prices now?
It will not effect much because:
In Saving Schemes interest is locked for 5 to 10 years and this low interest rate will not effect the current depositors until the maturity date. They will keep getting high rates of profit that they locked couple of years back.
These low interst rate's benefit will not be passed on to consumers or small business as banks already have their majority money locked in government's borrowing on high interest rates. Collecting new deposits will be impossible on 7% from the general public.
This move is more like too little and will effect too late. It will only benefit elite business class who can pull the strings and sweep the bank loans or the incompetent government to acquire cheap borrowings to clear their budget deficit. Don't get your hopes up high.
This government should've done this from the day one and also force commercial banks to increase private lending in order to generate overall economic activity.