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NEW DELHI-The Indian government has approved a $720-million overseas real estate investment fund for the country's largest mortgage company, Housing Development Finance. The fund will invest in the country's booming housing and retail property markets on behalf of investors who will not be able to repatriate the money for three years.

HDF has set up a unit off-shore in Mauritius to enable foreign investors to save on taxes. The fund will be allowed to invest $720 million dollars raised overseas in units issued by HDFC International Real Estate Fund. IREF would, in turn, invest in Indian companies, a government spokesperson announced.

The move is an attempt to leverage in some of the huge international investor interest in India's booming property markets. Already Morgan Stanley and GE Commercial Finance Real Estate have made multi-million dollar investments in the sector in India. Merrill Lynch predicts the country's real estate sector will grow from $12 billion in 2005 to $90 billion in 2015.