The urban poor, with their low incomes, uncertain employment, and low assets, has been side-lined by commercial banks who do not find them bankable. In order to rectify this situation, there is a need for a supportive role on the part of the government and commercial banks and a streamlining developmental role on the part of community-based financial initiatives. The Indian housing finance sector has failed to promote housing development across the country. In its desire to stabilize itself mainly in the major urban areas, the housing finance has largely neglected issues of the housing sector in rural and less–developed regions. Further, the financial housing needs of a large segment of the population are not being addressed. They continue to rely on informal sources for housing finance. This paper describes and analyses the perceptions and problems of home loan takers in Andhra Pradesh State. It offers policy options to make the housing finance more effective in addressing the hitherto neglected segment, the rural and less–developed region.