Housing Finance is a high-flying sector these days and is tipped to grow at a phenomenal 36% P.a. Banks and financial institutions have brought sea changes in their strategies and there is a shift from seller’s market to buyer market. Liberal tax incentives by the govt and low and competitive interest rates for housing finance has made this sector a red-hot sector. Keeping in view the importance of housing finance in solving the housing problem this paper analyses the performance of this sector while identifying its problems and challenges. A look has also been given to the prospects of this sector.