If the project goes ahead, the village will be the first of its kind in Oamaru.
The council was initially asked to lend Waitaki District Health Services (WDHS) $5million for the project and a further $3 million would be sourced from banks.
''In discussions since, it has been established that both council and WDHS will be better off to fully fund the project - both financially and from a security aspect,'' Waitaki District Council chief executive officer Michael Ross said.
''This will lower project costs overall and enable the project to be fully operational sooner.''
The bigger loan would be drawn down in two stages, with repayments starting within 18 months of the construction being started and the full loan amount will be repaid within 10 years.
WDHS will be investing $5.5million into the project, which will see the construction of a hospital-care facility, units and villas.
Stage one is proposed to include 41 rest-home beds and 12 units, while villas would be built on demand.
It is also proposed to include a community centre, with amenities such as a hair salon and cafe.
Stage one would cover about 2ha, with room to expand to up to 8ha.
The Observatory Hill project is to be established as a charitable trust to channel funding back into health services in the Waitaki district, including to Oamaru Hospital.
Company chairman George Berry told the Otago Daily Times yesterday, if the council approved the loan on Wednesday, the project would still require final approval from the WDHS board and the trustees of the new charitable trust, the owner of the village.
''These things are going to take a little time to put in place, but if the council loan is approved it's all positive for the project to go,'' Mr Berry said.
The tender process had been completed, but Mr Berry said he could not make any announcement on who had been awarded the contract yet.
Waitaki Mayor Gary Kircher said the proposed retirement village was ''far more than a business venture''.
''It is also providing a much-needed facility for Waitaki residents and will provide other benefits,'' he said.
''This is a growing market in New Zealand - there are over 100 people who go into residential rest-home or hospital care within the Waitaki district every year.''
The retirement village would add more jobs to the local economy, using local businesses and suppliers, and the profit that would come from the business would be reinvested in health services for the whole community, Mr Kircher said.
A full report will be presented to the council to make a decision on September 30.
