Housing finance institutions of Bangladesh are playing an important role in residential house construction in towns and cities of the country. However the assistance of these institutions is limited to a few fortunate ones, and the vast majority of the urban dwellers are left out of their services.  This paper reviews the institutional housing finance system in today’s Bangladesh, particularly its merits and demerits in the large metropolises, secondary cities, and small towns. The paper examines the contribution of financial institutions to urban housing development and assesses their performances. The paper also investigates ways and means for increasing institutional finance in urban areas of Bangladesh and suggests a number of policy guidelines for the low and lower-middle-income groups in particular.