The project was planned for completion in April next year, the 100th anniversary of the birth of North Korea's late founding president Kim Il-Sung.

The country has vowed to build "a great, powerful and prosperous" socialist state by then to mark the occasion.

But only 500 homes have been completed so far with just 10 months left before the planned completion date, the Chosun Ilbo daily and Yonhap news agency said.

"We confirm the reports," a Seoul government official told AFP on condition of anonymity.

The impoverished communist state, which suffers severe food shortages, has therefore cut the target to a mere 20,000-25,000 homes.

"In the first place, the project was never feasible given the economic situation in the North without massive foreign investment," Chosun quoted a source familiar with North Korean affairs as saying.

"Officials in charge of construction are expected to face harsh punishment."

Another project to re-pave and landscape the road to the Kumsusan Memorial Palace -- which contains Kim Il-Sung's embalmed body -- was completed in April this year, the source said.

Since last month the North has also been repairing a 23-metre (76 feet) Kim Il-Sung statue.

It also plans to build 77-storey apartment buildings for the privileged in Mansudae district, which the statue overlooks, the source said.

Copyright AFP (Agence France-Presse), 2011