Occupy by custom (7)

I believe the answer is:

inhabit

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'occupy' is the definition.
(I know this)

'by custom' is the wordplay.
'by' becomes 'in' (I can't explain this - if you can you should believe this answer much more).
'custom' becomes 'habit' (habit is a kind of custom).
'in'+'habit'='INHABIT'

Can you help me to learn more?

(Other definitions for inhabit that I've seen before include "Live in (a place)" , "Occupy - settle" , "Tenant" , "people" , "Dwell in" .)

I've seen this clue in The Irish News.

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