Mirroring a small town, the Korongee complex is being specially designed for people with dementia, featuring 15 houses a supermarket, cinema, café and beauty salon.
The $25 million project is a collaboration between aged care provider Glenview Community Services and health sector superannuation fund HESTA and will be built at Glenorchy in Hobart's north.
Glenview's Lucy O'Flaherty told ABC News: "For us, this is actually about providing a service for those people that can't afford to get into a service that might be bells and whistles that would cost dollars.”
"This is actually about responding to the most disadvantaged in our community."
The community will give residents the care they need but also an opportunity to roam the village.
"They'll have staff that will [take part in] discreet observation, there will be technology, the design of the facility will be as such that it will support residents within the village,” said Lucy.
The village will be based on a similar community, De Hogeweyk village, in The Netherlands.
According to the publication, residents in at De Hogeweyk village live longer and take fewer medications.
Australia’s version will cater for 90 people and will offer both public and private spaces.