This document is based on opportunities and challenges in the housing finance sector of Sri Lanka. Sri Lanka has embarked on a gradual transition from a system of directed credit in a highly segmented market toward an integrated market-driven housing finance system. This transition has included an increased role of private universal banks in the immediate term and a functioning secondary mortgage market in the long term. To nurture home mortgage markets, this ambitious agenda would require a stable macro economy, low inflation, and careful fiscal policies.