With sloping red-tiled roofs, trimmed lawns and a shop selling home-baked ginger biscuits, Villa Baviera looks like a quaint German-style village, nestled in the rolling hills of central Chile.

But it has a dark past.

Once known as Colonia Dignidad, it was home to a secretive religious sect founded by a manipulative and abusive leader who collaborated with the dictatorship of Augusto Pinochet.

Paul Schäfer, who established the colony in 1961, imposed a regime of harsh punishments and humiliation on the Germans living there.

They were separated from their parents and forced to work from a young age.

Schäfer also sexually abused many of the children.

After Gen Pinochet led a coup in 1973, opponents of his military regime were taken to Colonia Dignidad to be tortured in dark basements.

Many of these political prisoners were never seen again.

Schäfer died in prison in 2010, but some of the German residents remained and have turned the former colony into a tourist destination, with a restaurant, hotel, cabins to rent and even a boating pond.

Now, the Chilean government is going to expropriate some of its land to commemorate Pinochet’s victims there. But the plans have divided opinions.

Across Chile, more than 3,000 people were killed and more than 40,000 tortured during the Pinochet regime, which was in power until 1990.

Luis Evangelista Aguayo was one of those who was forcibly “disappeared”.

His sister, Ana Aguayo, sits by the fire in her house in Parral, the nearest town to Colonia Dignidad.

“Luis was quiet, he loved swimming. He wanted to create a fairer world,” she said.

Mr Aguayo worked as a school inspector, was a member of the teachers’ trade union and was active in the Socialist Party.

On 12 September 1973, one day after Pinochet overthrew Chile’s elected Socialist President, Salvador Allende, police came to Mr Aguayo’s house and arrested him.

Two days later, he was sent to the local prison, but on 26 September 1973, police arrived and dragged him into a van. His family never saw him again.

Ana Aguayo says a local farmer came to her house to say that he had seen her brother at the German colony.

“My mother and father went to Colonia Dignidad but weren’t allowed in,” she said.

“They went everywhere looking for him, at police stations, at the courts, but could get no information. My father died of sorrow because he wasn’t able to help him. My 96-year-old mother thinks she can hear him calling ‘Mama, come and get me’.”

Mr Aguayo was one of 27 people from Parral believed to have been killed in Colonia Dignidad, according to an ongoing judicial investigation ordered by the Chilean government.

The total number of people murdered here is not known, but there is evidence that this was the final destination of many opponents of the Pinochet regime, including Chilean congressman Carlos Lorca and several other Socialist Party leaders.

The Chilean justice ministry says investigations suggest hundreds of political detainees were brought here.

Ana Aguayo supports the government’s plan to create a site of memory there.

“It was a place of horror and appalling crimes. It shouldn’t be a place for tourists to shop or dine at a restaurant. It ought to be a place for remembrance, reflection and for educating future generations, so that it never happens again.”

But the government’s expropriation plans have divided opinion in Villa Baviera, where fewer than 100 adults live.

Dorothee Munch was born in 1977 in Colonia Dignidad.

“We lived in single-sex dormitories like barracks,” she recalls.

“From a young age, we had to work, cleaning the dishes for the whole community and collecting firewood.”

The government plans to expropriate 117 hectares of the 4,829-hectare site, including buildings where torture took place, and sites where victims’ bodies were exhumed, then burnt and their ashes deposited.

Ms Munch disagrees with the expropriation plans because they include the centre of the village, encompassing the residents’ homes and shared businesses including a restaurant, hotel, bakery, butchers and a dairy.

“We lived under a system of fear, we are victims too. We are rebuilding our lives and this will make us victims once more. Perhaps people my age could re-locate, but for the older residents it would be devastating.”

Erika Tymm arrived in Colonia Dignidad from Germany in 1962, aged two.

Separated from her parents, she remembers crying at night for her mother.

Like several other people from the colony, she says she was given electric shocks as a child.

She also opposes the expropriation plans and wants to stay living in the same place. “I want to be with people who understand what I went through.”

Chilean Minister for Justice and Human Rights Jaime Gajardo Falcón told the BBC that the government took the decision to expropriate the area in which the main buildings of the ex-colony are concentrated.

“These were sites of political detention, of torture, surveillance and training of state agents to commit crimes against humanity.”

The expropriation decree was published in July. Over the next few months, the state will determine the value of the expropriated assets, he said.

Seventy-three residents and former residents of Villa Baviera have written to the Chilean president expressing their concern about the expropriation plans and asking to be involved in discussions about it.

They have hired a public relations firm to handle their relations with the media and a representative of this firm accompanied the BBC on its visit to the site.

Separately the BBC spoke to several other inhabitants and former inhabitants of Colonia Dignidad who support the plan to create a memorial site.

Georg Klaube lived in the Colonia Dignidad from 1962 – when he arrived from Germany with his parents aged two – until 2010.

Like many boys in Colonia Dignidad, he says he was given electric shocks, forced to take psychotropic drugs and was sexually abused by Schäfer.

“Every night I was taken to a building, I was stripped naked, they would put a black towel on my face and electric shocks were applied, here, here, here,” he says, pointing to his genitals, his throat, his feet and under his arms.

“I think we should have a memorial because so much cruelty happened here to both Germans and Chileans. I cannot believe there is now a restaurant in the place where so many children’s tears, urine and blood flowed.”

Mr Klaube is part of a legal action – supported by an association of former and current Colonia Dignidad inhabitants – which claims that the leaders of Villa Baviera are not sharing out the income of the former colony fairly.

They want the government to ensure that when the expropriation takes place, the indemnification payment is distributed amongst all residents and former residents.

Among the other victims that support the expropriation plans are former political prisoners who were tortured in Colonia Dignidad, small farmers who were evicted from their land when the German colony was established and Chileans who lived locally and were sexually abused as children by Schäfer.

Schäfer was arrested in 2005 and in 2006 convicted of sexually abusing 25 children, including five counts of child rape. Several of his accomplices were also convicted.

Justice Minister Gajardo says it is important to ensure the horrors that happened here are not forgotten.

“Atrocious crimes were committed here. Until now it has been private property. Once it is taken over by the state, Chileans will be able to enter freely and it will become a space for memory and reflection to ensure that such crimes are never committed again.”