BACKGROUND The convergence between mental ill health and homelessness is well documented, but critical events that precipitate the downward spiral into homelessness, and promote personal recovery remain only partially explored in India. AIMS To explore causative factors of the descent into homelessness, and gain insight into creative and innovative approaches that promote personal recovery, specifically in institutional care settings. METHODS This qualitative study used focus group discussions, detailed personal interviews and anonymised data drawn from patient files. The data were analysed using phenomenological approaches. RESULTS Findings suggest that besides poverty and deprivation, death of the primary caregiver is a critical event in precipitating distress and a breakdown in the family, leading to a loss of support systems and a sense of belongingness, and rendering persons with mental illness homeless. Social affiliations, kinship, congruence between the real and ideal self, and the drive to assume a more powerful identity and/or pursue self-actualisation emerged as key factors aiding personal recovery. In the absence of a family, mimicking its attributes appears to ground institutions and professionals in an ethos of responsiveness and user-centricity, thereby promoting personal recovery. CONCLUSIONS This study highlights the critical need to further explore and understand the nature of distress and descent into homelessness, and gain insight into caregiver strain and strategies that can be developed to reduce the same. It further emphasizes the need to shed light on individual strategies that help pursue wellbeing, and delve deeper into the application of value frameworks in institutions and their role in promoting personal recovery among persons with mental health issues.