Housing is one of the basic needs. It is linked with many other sectors of the economy. Promoting this sector consequently promotes employment, consumption, and investment in the economy. A number of factors limit the supply of housing, especially in urban cities. Non-transparent ownership, vague property rights, weak legal and regulatory framework and ineffective foreclosures laws, ineffective land registration system, high transaction costs, and inadequate long-term housing finance funds have been the major issues of the housing sector. Several Islamic modes of housing finance exist in the market. Musharakah Mutanaqisah (diminishing partnership or Diminishing Balance Partnership; DBP) is the most widely used mode of housing finance followed by Ijarah and Murabahah for completed properties. For property under construction, Ijarah Mawsoofa Bi Dhimma (IBMD) is the most widely used followed by DBP and Istisna. The paper suggests some possible solutions for removing some of the constraints on housing finance.