The Nauru government says its difficulties in clearing outstanding debts for salaries and land rentals is part of the reason it is offering cheap housing loans.
The Finance Minister Roland Kun says there are also significant problems with overcrowding and this prompted it to offer 40,000 US dollar loans for the construction of 28 houses in last week's budget.
Mr Kun says they will be basic houses of two to three bedrooms.
He says the government's debt problems and its struggle to pay what's owed to islanders mean there's been very little construction in recent years.
Mr Kun says the government is slowly getting on top of the debt issue.
"But it is a substantial debt and we are only able to pay it over a period of time when we won't be able to settle the full debt in one financial year. What we are doing with the housing scheme is to enable people to access part of their value which is what's owed to them by Government, to access housing."