Spain's coalition government has agreed proposals including banning evictions until 2030 to address the country's housing crisis, as the 87-year-old woman whose forced removal last week triggered protests accepted an offer to return home.

Hundreds of people remained camped in one of Madrid's main squares on Tuesday to protest Maricarmen Abascal's removal from her home on a stretcher last Wednesday.

They are demanding legal reforms including a rent freeze and the automatic renewal of leases without abusive rent hikes.

Maricarmen Abascal was evicted on September 23 from her home in Madrid. Photo: Europa Press via Getty Images

Health Minister Monica Garcia said the ruling Socialists reached an agreement with junior partner Sumar on Tuesday for a set of new measures, including rolling over contracts until 2028 and banning so-called vulture funds from the housing market. However, the minority government faces an uphill battle to secure support in a fragmented parliament.

The government was seeking to broaden the definition of what constitutes a vulture fund beyond large private equity funds to any fund or company that buys housing for speculation, Housing Minister Isabel Rodriguez told a news conference, naming Urbagestion, the small company that evicted Abascal, as an example of a firm that might fall into that category.

Urbagestion did not immediately respond to a request for comment.

The measures will be divided into two decrees to be voted in parliament on Friday, with the majority in a first decree. The "final sticking point" of automatic contract rollover is in a second decree, Social Affairs Minister Pablo Bustinduy told a news conference.

Protesters gathered at Madrid's downtown square, Puerta del Sol, demanding political action to stop evictions and alleviate the housing crisis. Photo: Reuters

'TIME TO INTERVENE'

"It is time to intervene in the speculative housing market and start striking a balance between ordinary citizens and vulture funds," Garcia wrote on X.

Junts, the Catalan pro-independence party that would need to back the decree for it to pass, said on Tuesday it was still far from agreeing on all measures and wanted protection for small landlords, who make up the vast majority of property owners in Spain.

"We all agreed that evictions – where the property is owned by a fund, a vulture fund, run by someone managing millions of euros – obviously need to be stopped," Junts parliamentary spokesperson Miriam Nogueras said on RTVE.

"Lumping together in this category those who have invested their savings in a flat, a restaurant or a property – putting them all in the same basket – is a mistake," she added.

Madrid's tenants' union criticised the government's decision to split the measures into two decrees and said the Madrid encampment and others across Spain would continue until their full demands were met, with further demonstrations planned.

The lawyer for pensioner Abascal said on Tuesday that Urbagestion, the fund that owns her apartment, had offered a preliminary agreement that will allow her return to her home, paying 30% of her pension over the next eight years, equivalent to about €500 ($NZ1000) a month.

This would see her paying a similar level as prior to the eviction.

"She should never have been forced to leave," Beatriz Duro told reporters. "I hope this case serves to provide a collective response to the housing crisis."