The house, at Muttada near Thiruvananthapuram, belonged to his long-time neighbour.
The camera had a small radio AV transmitter which sent the images from the bathroom to the computer-linked receiver installed at the electrician's house.
The man had allegedly been viewing the images from the bathroom for the last eight months. Police have seized the hard disc of his computer for cyber forensic examination.
Two married women, both sisters, whose husbands are working abroad, were living in the house with their children.The camera was detected by one of them and police were informed.
Police said they were verifying whether he had fixed similar devices in other houses where he had installed water heaters.
The man, who was arrested on Monday, has been charged with outraging the modesty of women, violation of Information Technology Act, privacy intrusion and trespass, police said.