Muthoot Finance is the newest member of the home loan segment, announcing its entry on 15 April. The famous gold financing company will set up Muthoot Homefin, its home finance arm. The new entity will capitalize on Muthoot’s current resources worth Rs 12,000 crore and customer base totaling to 80,000 to expand footprint in the competitive home loan sector.
Initially, Muthoot Homefin will limit its operations to Kerala and gradually extend its services to residents of Tamil Nadu, Karnataka and Andhra Pradesh. Managing Director George Alexander Muthoot stated that the company “will offer housing loans from Rs 1 lakh to Rs 5 crore at an interest rate from 10.20 per cent up to 30 years”.
Muthoot Finance has made a planned transition into the segment. Last year, the company had launched a scheme to finance margin money required to buy a house. As per regulations, home loan borrowers have to furnish 20% of the property value while banks can provide support for the remaining 80% only. Often, this margin money runs into lakhs and, therefore, many home buyers fail to get a housing loan. This scheme aims to provide respite to this customer segment who are eligible for a home loan but do not have enough finances to contribute margin money.
The scheme tailored for margin money can be used by borrowers for the down payment of a new property and extension/renovation of an already owned property. It is much cheaper than personal loans, as the applicable interest rate is 11%. Further, loan amount varies from Rs 1 lakh to Rs 10 lakh for loan tenure of 1 to 5 years.