BEIJING, Nov 28, 2007 (AFP) - Beijing's old city is undergoing its biggest redevelopment in living memory, targetting thousands of ancient homes as the capital gears up for next year's Olympic Games, state media said Wednesday.

The government is spending 10 billion yuan (1.3 billion dollars) to rebuild or restore some 10,000 old courtyards homes along about 40 hutongs, the narrow old lanes that run through the heart of the capital around the Forbidden City and central Tiananmen Square, the Beijing News said.

Developers have been ordered to respect the city's cultural heritage and architectural style but have been allowed to demolish old structures as long as they rebuild them according to original plans, the report said.

Where possible, "old bricks, roof tiles, and stones" from demolished buildings should be used in the new structures, it said.

The work will be completed by June next year in time for a massive influx of foreign visitors expected for the August 8-24 Olympic Games, the newspaper said, quoting city planning officials.

Beijing is undergoing a 40 billion dollar remake that includes the construction of roads, railways and a new airport terminal ahead of the Games in order to present a modern and positive image to the outside world.

However vast areas of the ancient capital have been swept away by redevelopment with little concern for Beijing's unique heritage.

Conservationists complain bitterly about the disappearance of the courtyard homes, known as Siheyuan, with their grey walls and tiled roofs, and of the old hutongs.

But city officials argue that the current renovation efforts are slum clearance projects aimed at improving the lives of crowded inner-city dwellers who often live without plumbing or basic amenities.

The developers have clear orders to respect traditional architectural styles and are being advised by conservation experts, the paper said.

"The old-style hutong look must be preserved," it said. "For example in rebuilding we can use fake old-style bricks or paint to cover new walls to make sure they match traditional styles."