PERALIYA, Sri Lanka, Dec 26 (Reuters) - Sri Lankan housewife D.W. Leelawathi can still picture the 2004 tsunami as if it were yesterday, but three years on she and thousands like her are finally back in homes they can call their own and are moving on.
Standing among piles of sand, earth and rock in her front garden, the smell of fresh-cut wood still permeating the air as her new home nears completion, Leelawathi, 69, gestures to a nearby rail track, torn up as the tsunami swept away a passing train killing 1,270 people on board.
"The tsunami is not only in my dreams. Even in the daytime I feel as if it happened just yesterday, with so many bodies kept here," she said, pointing at a plot of grass next to her home. Two of her children were among the dead.
"But now our house is rebuilt," she said, standing in front of a 3-storey, 8-bedroom home her policeman son is building for her, partly funded by a 250,000-rupee ($2,300) grant.
The United Nations says nearly 100,000 families are now back in permanent shelter on the third anniversary of the worst natural disaster in memory, which left 35,000 people dead or missing in Sri Lanka and killed around 230,000 in total around the Indian Ocean rim.
But ever-deepening civil war between the Sri Lankan state and Tamil Tigers has hamstrung rebuilding work in the east and halted it in parts of the rebel-held north, where materials such as cement and steel rods have dried up because of a government ban.
Thousands of families in the war-ravaged north and east are still living in basic, temporary shelters with palm-frond roofs and corrugated metal sheet sides, their numbers swollen by others displaced by the war.
"Three years after the tsunami nearly 100,000 families, or around 80 percent of those affected by the disaster, are back living in totally new or repaired houses," said David Evans, chief technical adviser for UN Habitat in Sri Lanka.
"But the conflict has badly hampered or brought reconstruction work to a standstill in some parts of the north and east and another 21,000 houses are still required," he added. "So a big task still lies ahead in 2008 and progress in parts of the north will be impossible until the fighting stops."
In southern Sri Lanka, away from near-daily artillery duels and land and sea battles, it's a different story.
Ruined buildings still pepper the southern coastal drag, with vines and creepers steadily enveloping crumbling walls and piles of debris lying just where the tsunami left them: a random tiled kitchen unit here, a stranded doorway there.
"This land is for sale -- ideal for a holiday resort," reads one optimistic banner dangling from the remnants of one tsunami-flattened home in the southern village of Peraliya, where Leelawathi lives.
But unhindered by a war that is focused in the north, legions of donors were able to put up housing schemes and fund many self-build projects via grants, though still slowed by red tape and difficulties securing land to build on.
In the southern port town of Galle, the legendary cricket stadium finally came back to life this month, hosting a test match between England and Sri Lanka. Tourists are returning too.
Some residents are ignoring a government coastal exclusion zone, rebuilding right next to the beach in defiance of the risk of a repeat disaster.
Others are struggling, and say they have slipped through the cracks. They say grants available are not big enough.
"You can't build a house for 250,000 rupees," said 34-year--old Mohammad Naizer, who is slowly rebuilding his family home in Galle. Reinforcing metal rods poke out of the wonky concrete structure, which still has no facade, its interior visible to the outside world.
Rain drips through cracks between the new structure and a salvaged wing of his old house comprising a kitchen and a bedroom.
His two children, aged three and one, scamper around near-naked in the damp as his wife sits on a plastic chair in an empty open-air space that will one day be their sitting room. Naizer was once a gem polisher, but his machines were ruined in the tsunami and he now relies on odd jobs.
"No one helped me. It is very difficult to live in such conditions, five of us in one room," he said. "Because it is all open, sometimes animals come in, dogs ... snakes."
"It would be good if the government could provide a better house than this." (US$1 = 108.55 rupees)
(Editing by Roger Crabb and Sanjeev Miglani)