Chalets are pictured in the Alpine ski resort of Veysonnaz near Sion March 10, 2012. REUTERS/Denis Balibouse

ZURICH (Reuters) - The Swiss government proposed on Friday making non-EU foreigners sell their homes when they leave the country, prompting resistance from the real estate sector.

More than three decades after Switzerland liberalized property purchases for foreigners, and amid concern that foreign demand helps drive up prices, the cabinet said it was time to update the law to close loopholes and improve enforcement.

It suggested requiring citizens from countries outside the European Union plus Liechtenstein, Iceland and Norway to get permission to buy main residences in Switzerland.

“Permits should always be linked to the duty to sell the home again as soon as residence in Switzerland is relinquished,” the government said, as it opened a period of public comment before sending draft legislation to parliament.

It also proposed tightening rules covering other types of property investment by foreigners.

A real-estate lobbying group called Lex Koller Remains Modern, a reference to the original law that opened the property market to foreigners, blasted the proposals as a “nonsensical tightening” of the rules.

These measures, if adopted, “would pose unacceptable disadvantages for property owners while exacerbating the situation on housing markets” it said in a statement, adding that parliament had already opposed similar changes in 2014.

The lobbying group said foreigners were not to blame for overly expensive or scarce residential housing. Rising demand in an increasingly prosperous society with smaller households and more immigrants was to blame for driving rental prices higher, it said.

A study by Credit Suisse this month concluded that rental prices are actually falling amid strong construction investment driven by negative Swiss interest rates. Prices of owner-occupied housing are no longer rising after a 14-year period of price growth ended late last year, the bank said.