In short, the housing finance system in India is still in its nascent stage. It has to cross many hurdles before it can become an effective instrument for solving the housing crisis presently faced by the country. In order to overcome the inadequacies and deficiencies of the existing housing finance system in India, improvements in the following directions are urgently needed. Only then will the flats in Kochi and other cities become affordable to the common man.

Direct housing finance operations by the existing network of institutions including the branch network of Commercial Banks, LIC, etc, are unlikely to succeed in view of the high transaction costs. As effective affordable housing finance system would call for innovative strategies including flexible lending norms and minimal transaction costs which could be achieved by providing institutional finance through a network of specialized home-loan institutions at the grass-root level.

There is a need for decentralizing the home loan institutions and encouraging the private sector to develop scores of such institutions with a view to dispersing their operations at the grass root level all over the country and to enable them to adopt location specific strategies for mobilization of household savings for housing. In this connection, the action being taken by the Ministry of Urban Development for establishment of a separate housing finance institution for the North-Eastern Region and Sikkim is a step in the right direction.

Housing finance would need to be integrated into the financial system as a whole if it is to assume the proportions that will be required to finance the projected needs. This in turn would mean evolution of a sound structure of financial institutions and development of its operational links with government policy especially the financial policy. In this connection the National Housing Bank that is a subsidiary of Reserve Bank of India has a very crucial role to play.