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Both ray tracing and practical measurements have confirmed existence of clustering of signal; during propagation in an indoor environment. In this paper we propose a hybrid MIMO channel model that allows incorporation of spatial correlation into modeling of indoor environments involving the use of multiple antenna elements. The MIMO model is based on the clustering of rays during indoor propagation and combines statistical property of cluster with ray tracing algorithms. With this model a more realistic simulation can be made, which allows investigation of the actually achievable diversity gain using smart antenna array for a wide range of indoor scenarios.