The UK government is sending an expert team to the Chagos islands to see if it is feasible to resettle the tropical archipelago from which it forcibly evicted hundreds of families nearly 40 years ago to make way for a massive US military base.

Up to 5,000 US servicemen presently live on the largest island, Diego Garcia, and have all their food, drink and essentials flown in. But the remaining 50 islands and reefs which stretch over hundreds of square miles of some of the most pristine seas in the world are now uninhabited and it is the dream of many Chagossian families living in exile mainly in Britain and Mauritius to return.

The independent consultants, which will not include Chagossians, have been instructed by the Foreign Office (FCO) to "neutrally" examine the options and risks involved in establishing several sorts of community on the outer islands as well as on Diego Garcia itself. The suggestions include "a modern lifestyle, an eco-village, a pilot resettlement with some employment on the military base and a scientific research station", says the terms-of-reference paper.

At their peak in 1953, the islands supported a population of more than 1,000 people and the Foreign Office paper suggests that a decision on whether any of Chagossians are allowed to return to the British overseas territory will hang on the costs to the Treasury of maintaining a community and whether they can be self-sufficient. The costs of setting up police and health facilities, running water, waste management, communications and transport will all have to be considered.

"All options should consider the development of a sustainable local economy, social and livelihood development and income generation for any resettled individuals," the paper says.

The coral islands, which have some of the cleanest waters in the world and half the total area of high quality coral reefs in the Indian Ocean, are rich in fish which would normally form the economic base of any resident community. But since Britain established the archipelago as the world's largest marine reserve in 2010, it is theoretically illegal for anyone to fish there – except for the US military who have been allowed to catch around 50 tonnes of fish for sport. The setting up of the reserve by the then-foreign secretary David Miliband was widely interpreted as an attempt to prevent any resettlement by the evicted Chagossians.

But the terms of reference for the consultants also suggest Britain may be prepared to compromise on the total ban on fishing. The team has been asked to consider eco-tourism, fishing, game fishing and "industrial development". If the Chagossians return, they have said they plan to re-establish copra production and fishing, and to develop the islands for tourism.

Britain has previously made it impossible for the islanders to return, citing both costs and sea level rise. A 2003 feasibility study led to the government concluding that resettlement would be "costly and precarious" and that sea-level rise was averaging 5.4mm a year – twice the global average – and accelerating. This was refuted by other scientists.

The study will consider many other environmental factors that could make life impossible for a small community to establish itself, but which appear to have not deterred the US military. The terms of reference specifically ask the consultants to look at how climate change could affect life on the islands in future. "This should include sea-level rise, rogue waves, coastal erosion, tropical cyclone frequency and intensity and changes in wave and wind conditions."

David Snoxell, co-ordinator of the Chagos islands' all-party parliamentary group and former British high commissioner to Mauritius, said: "The FCO are to be applauded for initiating a new feasibility study which the all-party group has been arguing for since 2008. The foreign secretary announced in December 2012, following the Strasbourg verdict, that the case was inadmissible, that he would take stock of policies towards resettlement, but it has taken 15 months to get only to the stage of publishing terms of reference. It is imperative that the study is completed by the end of 2014 so that parliament is consulted and decisions taken before the election. We do not want a repeat of what happened over the announcement of the marine protection area in April 2010, five weeks before the last general election, thus ensuring that there was no time to consult parliament."