4 August 2011 Last updated at 14:27 ET

Israel approves 900 East Jerusalem settlement homes

By Wyre Davies BBC News, Jerusalem

Har Homa is already home to more than 9,000 people

The Israeli government has given final approval for more than 900 new homes in occupied East Jerusalem.

The move, to build houses for Jewish families in the settlement of Har Homa, has been criticised by peace groups as cynical.

But the Israeli government says it will help address the country's housing shortage.

Har Homa is one of the largest and most controversial Jewish settlements in East Jerusalem.

It is regarded, under international law, as occupied Palestinian land, but Israel says it is part of its territory.

The Israeli interior ministry has now given final approval for 930 new homes in Har Homa, which is already home to more than 9,000 people.

Interior Minister Eli Yishai said the project was important because it would include small, affordable housing units.

But peace campaigners have criticised the announcement as a cynical exploitation of Israel's housing shortage.

Hagit Ofran, from Peace Now, said the approval would make a two-state solution - between Israel and the Palestinians - ever more difficult.

The expansion of Har Homa, say campaigners, would effectively cut off the Palestinian town of Bethlehem from other Arab areas in East Jerusalem.

Continued building in East Jerusalem and the occupied West Bank is seen as one of the biggest issues preventing a resumption of peace talks between Israel and the Palestinians.

Previous announcements about building plans in Har Homa have been criticised by the US, UK and many other foreign governments.