Khlystov and his 33-year-old son-in-law, Maxim Samokhval, at first tried to block the bulldozers but then stood aside and watched as the two-storey house was destroyed.

The earthmovers ended Khlystov's battle to stay in his house, one of the last razed in the Mirny neighbourhood to make way for the Winter Olympics in 2014.

For President Vladimir Putin, the Games are a prestige project that will allow him to showcase Russia's ability to organise major events and boost its international image.

He regards the event as an important element of his new presidential term as well as a chance for the country, which will also host the 2018 World Cup soccer finals, to show off its sporting prowess.

New homes are being provided for Sochi residents displaced by the reconstruction of their town. But such is the importance attached to the Olympic project that people who don't want to move have no option but to get out of the way of the bulldozers.

What sealed the fate of the Khlystov family was the fact that they had failed to prove they owned their property, despite Samokhval's wife, Tatyana, enlisting the help of the local priest as well as the local authorities.

"She went to the spiritual authorities and the secular authorities," Samokhval said. "One said 'pray' and the other said 'sue'."

All along this stretch of the Black Sea coast, houses have been pulled down and thousands of people resettled in the Olympic building boom that has overtaken this city of 340,000 in the shadow of the Caucasus mountains.

The air in Mirny is thick with cement dust. A flyover was built near Khlystov's home and the house shook violently when holes were drilled for its pylons.

Construction of the Olympic venues and infrastructure alone is expected to cost more than $6 billion, and half of this will be privately financed.

The final bill for hosting the Olympics in Sochi, most of whose spas and resort hotels date from the days of Stalin, who died in 1953, is likely to end up much higher.

BUILDING A SHOWCASE

Just out of sight of Khlystov's garden, the Iceberg stadium, the jewel of the Olympic park, glows pale blue in the dark and seems to hover over the churned up mud around it.

An undulating steel structure encased in glass, it will host the figure skating in 2014 and is one of six stadiums to be built in the complex as venues for ice events and Olympic ceremonies.

Hotels, sports facilities and general improvements are under construction in the city, and work is going on in the mountains above Sochi where other events will be held.

This means upheaval for some residents. The cost of resettling 1,500 families in the path of the bulldozers has been borne by the government of the relatively wealthy Krasnodar region in which Sochi lies.

Such programmes are not unusual for an Olympics. Rights groups criticised China for forced evictions before the 2008 Beijing Games, with some estimates indicating that 1.5 million people were moved, many against their will.

The Chinese government said the demolition of homes in parts of Beijing earmarked for development before the Olympics was carried out fairly and legally.

A few London residents were also rehoused because of construction work before this year's Olympics in Britain.

In Sochi, far from everyone is unhappy about having to move into new homes in exchange for being uprooted.

Viktor Altunyan, an employee in the Sochi department of culture, was moved from a small house in Mirny to a newly built village a short distance away near the border with Georgia's Abkhazia region.

He now lives in a house more than twice the size with his mother, wife and young child, surrounded by almost identical homes decorated with similar paintwork.

"The president's words came true for me," Altunyan said in reference to Putin's pledge that people should not be moved into worse housing. "It's better here in terms of location and utilities, electricity and water. It's only positive."

Altunyan has put some plants and a young persimmon tree in his garden, and says he no longer misses his old house, which he built himself and lived in for 15 years.

LEGAL BATTLE

But Khlystov, 52, says he and his family were cheated out of fair compensation by a bureaucratic loophole. They had not managed to prove they owned the land on which their house was built, a condition for receiving a new house in exchange.

On bailiffs' orders, half the house had been bulldozed a few days before the workers - accompanied by police - returned to finish the job on September 21, even though the family had continued to live in it with Samokhval's children, aged three and eight.

The New York-based watchdog, Human Rights Watch, had urged the International Olympic Committee to intervene, saying "the illegal eviction of a family in Sochi casts a dark shadow over preparations for the 2014 Winter Olympic Games".

Other Sochi residents have complained that compensation has in some cases been arbitrary, and some have accused the local authorities of damaging the environment and harming wildlife.

But authorities have defended their actions. The Krasnodar region's deputy governor, Alexei Saurin, has been quoted by local media as saying 15.5 billion roubles was spent before the end of 2011 on resettling 90 percent of the people whose homes had been demolished.

"The state built villages, perfect houses. I don't have such a house," Dmitry Chernyshenko, President of the Sochi 2014 Organising Committee, told reporters in Moscow.

Without commenting on the Khlystov case, he said the people being relocated were getting a fair deal but some were trying to game the system.

"Sometimes people built buildings without any permission on land which did not belong to them," he said. "They are trying to earn money from the state."

COURT CASES AHEAD

About 180 cases will be settled in court, most of them disputes over valuation, Saurin said. In cases where cash compensation was not provided, the government had built seven new residential developments and apartment blocks, he said.

Khlystov said he had lived in Mirny for more than three decades since being given some land there in the Soviet era.

But Oksana Rafalskaya, a spokeswoman for the Krasnodar regional government's Olympic department, said the Khlystovs had never established the right to use the land for a residence so it remained government property. She said Khlystov's extended family had been offered flats as compensation.

The start of the Games in February 2014 is now less than 500 days away and officials say construction of the sports facilities is about 70 percent complete.

"When the construction is over, it will be better," said Nina Shishimorova, a neighbour of the Khlystovs in her late 50s.

"We already have roads and they've started picking up the rubbish again. Compared to the way the rest of Russia is living, we don't live too badly." (Additional reporting by Denis Pinchuk and Steve Gutterman, Writing by Melissa Akin and Thomas Grove; Editing by Timothy Heritage and Giles Elgood)

• A Permanent Economic Emergency