This chapter deals with the formal and informal housing finance markets in two Indian cities, Visakhapatnam and Hyderabad, in the state of Andhra Pradesh. The chapter concentrates on how formal and informal housing finance relate to the housing conditions of the ‘economically weaker section’ (EWS) households, defined as having an income of less than Rs 1,250 per month (US$ 41), which is regarded as barely sufficient to cover basic needs.2 This group represented approximately 26.1 per cent of the urban population in 1987-8 (Dandekar et al. 1993:19). Our aim is to examine to what extent each finance market is compatible with the survival strategies of the low-income households by introducing the concept of the ‘finance gap’ and the implications for household debt and displacement. We argue that the form of house construction and the financial arrangements which are part of public housing programmes do not match household survival strategies and that the terms and conditions of informal housing finance are generally more adequate.