Live there, wearing distinctive clothing (7)

I believe the answer is:

inhabit

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'live there' is the definition.
'inhabit' can be an answer for 'live' (synonyms). I am unsure of the 'there' bit.

'wearing distinctive clothing' is the wordplay.
'wearing' becomes 'in' (as in being 'in' certain clothes).
'distinctive clothing' becomes 'habit' (habit is a kind of clothing. I am not sure about the 'distinctive' bit.).
'in'+'habit'='INHABIT'

Can you help me to learn more?

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

I've seen this clue in The Irish Independent.

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