Population growth is the determinant force driving the demand for land forrnresidential development. Thus to cope up with the ever increasing demand forrnland for residential purpose, especially in the cities of third world countries thernmunicipalities should have to be well-equipped to enhance residential landrndelivery.rnThis study attempts to analyze primarily the causes of inadequate residentia lrnland supply, and its effect in the city of Bishoftu by taking into account a fiveyearrndata. To conduct the research survey method has been employed, andrnadditionally it was triangulated by interviews, physical observation andrndocumentary research. The analysis is made based on the availablerninformation and the collected data, which elucidates a gap between therndemand and supply. In this research effort is made to analyze the situation ofrnland delivery system both in the rent and lease regimes.rnThe residential land supply is constrained among others, by mUltiplicity ofrnaccountability of the municipality, poor institutional capacity, and lack ofrnstrategy to address the low-income group, and competitive actors in the supplyrnof new residential land. However, not significant there is a sign of speculationrnand hoarding. Thus, because the municipality is not adequately supplyingrnresidential land as a subsequent effect illegal settlement on the out skirts of therncity have been expanding and market price for residential land is found to bernhigher as compared to other cities.rnThe eviction of peasants living on the urban fringe is a lso one of the issuesrnassessed and it is found that the city is growing at the expense of the peasants,rnsince the compensation does not balance what they are forced to loose. Thernrent rate in general is very low in the city, which in turn attract people forrnspeculation and hoarding. This is more likely in the case of lease regime.Thus to enable the municipality to supply residential land consistently in thernfuture multifaceted interventions will be a sine qua none. Among these, therncurrent multiple accountability of the municipality should be waived, lowrnincome targeting strategies should be designed , deliberate policy reform orrnregulations will be necessary and compensation of peasants should bernparticipatory, in its real sense, are worth mentioning.