Abstract: Housing finance systems in developing countries have been the subject of considerable international agency research and lending attention in recent years. The lack of availability of finance for public sector housing programs and for the purchase of construction of housing by all income groups especially the urban middle and lower class is typically a major constraint on the ability of supply to meet demand. The housing finance system in India with special reference to Chennai is described and critically analyzed in this study: From the last decade, the Government of India has been continuously trying to strengthen the housing sector by introducing various housing loan schemes for rural and urban population. There is considerable research to be done in relation to the provision of housing in urban areas. The present study examines the developments in the housing finance in India in the early 21st and the magnitude of the problem of housing in the country and the implication of Housing Policies and evaluate the performance of selected housing finance Institutions and Banks during the period 1991-2005 in terms of various business parameters and their involvement in meeting the financial requirement of the urban housing beneficiaries and their perceptions about borrowing. Major financial institutions were chosen for the study. The sampling frame of Housing Finance Institutions and sample frame of beneficiaries( 300 respondents) for each of the financial institutions are the fundamental units of the study, The data collected were analyzed with appropriate statistical tools and techniques such as simple ratios, percentage analysis, regression methods, formulation of multiple regression models, ANOA, chi-square test , T-test.. This study is an attempt to provide information will help in the formulation of realistic policies and ensure that the financial assistance reaches the larger sections of the society.