SULAIMANIYA, Iraq, May 12 (Reuters) - In summer, the heat is unbearable. In winter, the torrential rains turn the cramped, leaking tent where Khalid Jamhuri lives with his family into a freezing morass of mud.
Still, Jamhuri is unwilling to leave this refugee camp in the semi-autonomous, northern Kurdistan region and return to the Sunni Arab area of Baghdad where Shi'ite militiamen killed his parents, brother and cousin in 2006.
"Some days I make enough to bring home food to eat. Some days I don't," said the slender 19-year-old, who now looks for construction work to support his wife, brother and new baby.
Jamhuri is one of the 3.8 million Iraqis who, prompted by six years of sectarian killing, packed up their belongings and fled to safety. About 1.8 million of them fled to different parts of Iraq and the rest left the country, mostly to Syria and Jordan.
Resettling displaced Iraqis promises to be a major challenge towards achieving reconciliation and averting renewed violence.
It is also key to getting a sluggish economy going and attracting foreign investment that has proven so elusive for Iraq, which has vast oil resources but little real industry outside that underproducing sector.
"This (resettling refugees) will encourage foreign investors," said Iraqi analyst Hazim al-Nuami, adding that investors see a troubling signal in the fact that most refugees have not returned home.
Very few have returned, a sign of widespread wariness in a country still rocked by violence and where the threat of renewed sectarian war lurks just under the surface.
Only 195,000 internally displaced Iraqis came back to their homes by the end of 2008, the United Nations said, but officials hope that figure could reach 400,000 by the end of this year if the security situation improves in Iraq.
That's far from guaranteed. A relative lull in violence ended with a rash of bloody suicide bombings across Iraq in recent weeks, bringing the monthly civilian death toll to 290, the highest since last November.
Many fear security will deteriorate when U.S. combat troops pull out of Iraqi cities in June, ahead of a full U.S. withdrawal by 2012, and before national polls due late this year.
The recent attacks, which mainly targeted Shi'ites, have made some refugees reconsider the decision to return home.
"We don't want to be hasty. We'll see what the coming months bring," said Afyaa Shaker, who fled to Egypt in 2006.
Jabbar Mohammed Ali, a displacement and migration official in Sulaimaniya, said only 3 or 4 percent of the 8,500 displaced families registered with his office have returned home.
The fortunate among internally displaced Iraqis can afford to rent apartments or homes, or they live with relatives.
The less lucky squat in abandoned state buildings or end up at camps like the one in Sulaimaniya. Most report difficulty in obtaining health care and sending their children to school.
The Iraqi government offers grants to displaced families, but the amounts are small and often difficult to obtain.
Layla Idan, a single mother, is one of the displaced Iraqis who says the government has not delivered on its promises.
Her children complain of sleepless nights in their dripping tent. "We need the government's help," she said.
Iraq's Ministry of Displacement and Migration has offered money to families that return to their homes. But even the modest compensation offered by the government is thrust into doubt as Iraq, dependent on oil revenues for almost all its revenue, reels from a major slump in oil prices.
"We tell them about oil prices and they ask: 'Does the value of a person go up and down with oil prices, too?'" said Ali, the displacement and migration official.
EPICENTRE OF SECTARIAN CLEANSING
Baghdad, where al Qaeda just a few years ago controlled whole neighbourhoods and Shi'ite militias ran roughshod over others, was the epicentre of Iraq's internal displacement.
After the ethnic bloodshed of recent years, the city today is far more divided along sectarian lines than it once was.
The government says about 104,000 families were displaced from their homes in Baghdad, and about 32,000 have returned.
"If we look at Baghdad, we see a lot of resettlement," said Displacement and Migration Minister Abdul-Samad Sultan, putting a bright face on the situation.
In Baghdad's Doura neighbourhood, 41-year-old Abu Mohammed, a Sunni, watches as workers repair the doors of his home, which was ransacked after he fled to Syria in 2007.
He was encouraged to return by improving security, due in part to the government-backed militia guards keeping watch of the mainly Sunni area, once terrorized by al Qaeda and Shi'ite militias.
"When I left, Doura was a city of ghosts. We didn't know who our enemy was and we were attacked from all sides. Now, it's totally fine," Abu Mohammed said.
But the number of those returning home is small.
Iyad Menfi Mohammed wants to come back to Baghdad from the camp in Sulaimaniya, where he has been since Shi'ite militiamen occupied his house and stole his money and valuables.
"If they stormed my house, how can I come back?" he asked.
Editing by Missy Ryan and Megan Goldin
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