Tasmania will become home to what is being touted as Australia's first suburban village designed specifically for people with dementia.

As well as 15 tailored houses, the village will have a supermarket, cinema, cafe, beauty salon and gardens.

The $25-million Korongee complex will transform a derelict site at Glenorchy in Hobart's north.

The village will be based on international best-practice models, including De Hogeweyk village in the Netherlands, where residents have been found to live longer and take fewer medications.

There are many facilities which have aspects catering for dementia patients - like streetscapes - but this is the first creating an entire village.

But this complex will have a particularly Tasmanian flavour with cul-de-sacs reflecting the landscape nearby.

Who's behind it?

The Dutch facility includes a supermarket where members of the public also shop. ( Supplied: Hogeweyk Dementia Village )

The project is a collaboration between aged care provider Glenview Community Services and health sector superannuation fund HESTA, which will kick in $19 million.

The Commonwealth Government is also providing funding.

How will it work?

Glenview's Lucy O'Flaherty said the village model aimed to provide real life experiences for those with the disease.

"For us, this is actually about providing a service for those people that can't afford to get into a service that might be bells and whistles that would cost dollars," she said.

"This is actually about responding to the most disadvantaged in our community."

Residents will be free to wander the village in a supported environment.

"They'll have staff that will [take part in] discreet observation, there will be technology, the design of the facility will be as such that it will support residents within the village."

What makes this one different?

Lucy O'Flaherty says staff from businesses on site will receive specialised training in dealing with dementia. ( ABC News: Aneeta Bhole )

Ms O'Flaherty said the project would have a particular Tasmanian flavour.

The operators are working with the University of Tasmania to identify local lifestyles to be able to support people to live a longer life.

The Korongee village will have a cul-de-sac design referencing a typical Tasmanian street. ( Supplied )

Each house will have a waiting list for a particular lifestyle.

"For example, if you have always been a tradie there is probably an ilk to your day - up early, knock off for lunch, finish at three," she said.

"If you live with other tradies there is more likely to be companionships or opportunities to have similar interests.

"[On the] other end of the spectrum, if you have always been an artist or a writer, [you're] probably not a morning person and it's more about the social side of things.

"So we'll have people living in those houses more conducive to their lifestyles and the familiarity is really important with people living with dementia."

The university is also researching and designing the decor of the houses.

Are the businesses real?

Businesses in the village will be an integral part of the setup.

People in the De Hogeweyk village have been shown to live longer because of their surroundings. ( Supplied: De Hogeweyk )

The local community will have input into what businesses will be part of the village.

"We will be supporting all the staff, whether they are the staff of these organisations, to get trained so they're really clear about dementia, how to care for people living with dementia to create the most normal and real environment," Ms O'Flaherty said.

"At the end of the day ... it is about creating real environments, not these fake environments that we currently have as institutions."

The village will provide jobs for local people - up to 50 new and ongoing jobs during and after construction.

Who can go there?

The village will cater for 90 residents but will be open to the community to come and go.

There will be no age limit for residents. People with early-onset dementia will also be able to live there.

There will be public and private spaces to maintain the privacy of the residents, while encouraging normal life.

What's the aim?

Tasmania has the country's oldest and fastest ageing population.

"If we don't do something now, we are going to be in strife. We need to be proactive, we need to be innovative," Ms O'Flaherty said.

Professor James Vickers says the home-like environment will help reduce stress. ( ABC News: Aneeta Bhole )

The Wicking Dementia Centre's Professor James Vickers said the concept was revolutionary and would transform dementia care.

He said research had shown entering an aged care facility could create stress and accelerate the rate of decline for those with dementia.

"You need to look at a model where people become destressed and the best way of doing that is in a home-like environment," he said.

"We need to be looking at facilities that are fit for purpose."

It is hoped the village will open in about 18 months.