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Because of the vast linkages of housing, both forward and backward, with over 250 other industries promotion of housing enables kick-starting an economy in times of recession. Often housing is considered as an ‘Engine of growth’ particularly for developing nations like India. Because of the strategic significance of housing, it has been one of the top priorities for the successive Governments in India. But, only since the late 1970s there has been an organized attempt to promote the institutional mechanism for housing finance in India. The Tenth Plan (2002-2007) sought to promote housing sector in a big way. So did the Eleventh Plan (2007-12) and the Twelfth Plan (2012-17). This current era of Niti Aayog is no exception in this regard. Despite the huge investments by the public and private sectors and also significant growth in institutional housing finance, housing shortage is still huge in India. The acute housing problem in India has its impact essentially on the poor and other marginalized groups, as vast majority of them are beyond the reach of the formal housing finance system. Financial inclusion is a national priority in India, because of its capacity to ensure fast and balanced economic development of the nation particularly in view of the growing exclusiveness of the system in the ongoing post-reforms era. The policy initiatives of the RBI since 2008 have been in the direction of promoting lower amount housing finance (like, Affordable housing) by banks. In this context, the author makes an empirical study of the issues and challenges of commercial banks in providing housing finance, particularly the ‘inclusive’ type housing where the beneficiaries are the low income and marginalized sections. Based on this study, the author could offer strategies for promotion of housing finance by commercial banks and that too in an inclusive and balanced manner.