New entrant in Home Loans | Muthoot group
The Muthoot Pappachan Group (MPG) has decided to enter home loan business targeting low income clientele, whose monthly income is between Rs 10,000-30,000. Muthoot Housing Finance will operate as a 100% subsidiary of Muthoot Fincorp – non-banking finance company (NBFC) of the Kerala-based group.
The company is confident that it will find many takers for its home loans from the existing customer base of the group. The Muthoot Pappachan Group is involved in financial services mainly gold loans–hospitality, IT infrastructure, property, automotive and renewable energy.
Aims/Plans:
- To disburse about 125-150 crore in 18 months time through this HFC.
- The loan size would be between Rs 3-10 lakh with a maximum repayment period of 15 years. They will charge a higher interest rate of 14-15% compared to 11-12% being charged by banks as they will cater mostly those who find it difficult to get loans at banks.
- Initial investment of Rs 100 crore by promoters and to raise funds in future from banks and multilateral financial organizations.
- The company aims for a net interest margin (NIM) of 3%. (NIM is the spread between the lending rate and cost of borrowings).
- Initially they will open 25 branches in the suburban areas of Ahmedabad, Bangalore, Chennai and Mumbai. As there is always high demand for low cost homes in the distant suburban areas of metro cities due to large scale migration from rural India.
- The company is in talks with Tata Housing and other developers of low cost housing projects.
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