(Updates with presser, formal release) By Kamil Zaheer and Sanjib Kumar Roy NEW DELHI/PORT BLAIR, Dec 22 (Reuters) - Permanent shelters for tsunami survivors in India's Andaman islands do not reflect local needs and threaten to undermine the traditional way of life of indigenous people, a report said on Friday. About 3,500 people out of the 370,000 residents of the remote archipelago were killed or went missing when the December 2004 Asian tsunami slammed into scores of islands. Two years on, more than 9,700 families are without permanent shelter and live in temporary homes of corrugated iron which often become unbearable in the summer heat. "Prefabricated steel structure houses ... have been conceived more on the basis on capacities of delivery agencies rather than community needs and priorities," the report by the Society for Andaman and Nicobar Ecology (SANE) and agency ActionAid said. Homes for fishermen were being built on hilltops while farmers will get houses far from their fields, the report said. Activists say most families will be relocated from the sites of their original homes and even to different islands. "People don't know on which island they will be relocated ... two years on, not one permanent house has been built," Vivek Rawal, co-author of the report, told a launch news conference. LITTLE CONSULTATION Worse, the traditional lifestyle of the Nicobarese tribe -- who make up the majority of the homeless -- has been ignored by federal planners sitting in New Delhi more than 2,400 km (1,500 miles) away, the report said. The strategically important islands, close to the Strait of Malacca, are directly ruled by New Delhi, a factor activists say has resulted in little consultation in rebuilding efforts. "This is the result of centralisation of decision-making and lack of autonomy and freedom of the local community to discuss," said Vivekananadan of the Chennai-based Tsunami Rehabilitation Information Network, which also worked on the report. Nicobarese, most of whom live on the archipelago's southern islands, have traditionally lived in wood and bamboo houses on stilts that can withstand most earthquakes, a common occurrence. Old Nicobarese homes had lots of space between them where families keep their livestock, particularly pigs. But planners failed to factor this in, the report says. "It will break up tribal society completely. It will fracture it," Samir Acharya of SANE told Reuters. The government disagrees. "The permanent shelters have been designed by the best experts from various ministries in consultation with tribal and grassroot leaders," Dharam Pal, the islands' relief commissioner, told Reuters in Port Blair, the archipelago's capital. On relocation of planned permanent homes, government officials said it was done so new clusters of houses could be provided facilities such as medical centres and water supply. On Thursday, the government approved 12.2 billion rupees ($273 million) for reconstruction of houses and other "community facilities" for the tsunami survivors. But, the report says, "despite the diverse backgrounds and wide range of lifestyles of communities ... (the) government plans to propose a single type of house for 9,714 families." LOCALS GETTING SHORT SHRIFT? Acharya says the planned homes will be too small, 450 square feet (42 square metres) and standing just 4 metres (13 feet) apart, less able to withstand earthquakes than the more flexible traditional structures, and requiring much more upkeep. Anger at the rebuilding efforts spilled into rare violence last month when dozens were injured in clashes with police on Little Andaman island, 100 km (60 km) south of Port Blair. Acharya slammed the government building agency as an "exotic body" with no knowledge of local culture and said building houses next to each other would not allow people to grow coconut trees. "Every Nicobarese family normally has scores of coconut trees. They (government officials) have botched up the whole issue," Acharya said, demanding New Delhi allow survivors to cut a portion of the island's forests to get timber to build their own houses along with government financial assistance. The report said that hundreds of homeless families lacked temporary shelter and did not have their names down for permanent residences. Hundreds of people, stricken by panic after the tsunami and the aftershocks of the earthquake that caused the killer waves, fled the islands for the mainland. By the time they came back, activists say, there were out of the loop. Last week, voluntary group Housing and Land Rights Network (HLRN), which also supported the Andaman report, said many tsunami survivors in the southern mainland state of Tamil Nadu still lacked adequate housing, compounding their trauma. The tsunami killed more than 7,000 people in Tamil Nadu. ($1 = 44.71 rupees)