Israel has approved a plan to construct 2,200 housing units for Palestinians in East Jerusalem, an official said on Wednesday.
The move was hailed as a victory for Arab residents of the city, according to a Jerusalem municipality spokesperson, Xinhua reported.
The new neighbourhood, called Arab al-Sawahra, would mark the largest construction project for Palestinian families in East Jerusalem since Israel captured and annexed the territory in the 1967 Middle East War.
Under the plan, residential units, schools, commercial centres and parks would be built on 1,500 dunams (about 370 acres) of land next to the Palestinian neighbourhood of Jabal Mukaber, said Jerusalem municipality spokesperson Sapir Peles.
The plan was approved on Monday by the Israeli interior ministry's District Planning and Building Committee, said Peles.
However, Ir Amim, an Israeli human rights watchdog, said in a statement sent to Xinhua that the approval related to a general plan only and actual construction might not begin soon.
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"To proceed, detailed plans, which could take several years to develop, must be approved before building permits can be issued," according to the watchdog.
Settlers and right wing parties had fiercely opposed the plan, impeding its advancement for more than two years. The latest approval came only after the Jerusalem District Court ordered the planning committee to unfreeze the plan.
"The housing shortage in East Jerusalem is enormous, and this is the first time that a plan of this extent has been approved for a Palestinian neighbourhood," Aviv Tatarsky, a researcher with Ir Amim, told the Jerusalem Post. "I think this is a very unusual and very good development," he added.
Arab residents of Jerusalem have long sought building permits, but the municipality rarely approves it.
Over the past decades, East Jerusalem has grown with no official master plan or outline, which has led to widespread illegal building activities that includes, 20,000 unauthorised residential units and public buildings, according to municipal estimates.
Israel's annexation of East Jerusalem has never been recognised by the international community.
The city has seen a surge in clashes between Palestinians and Israelis, mainly over construction in the Jewish settlements of Jerusalem and visits of Israelis in the al-Aqsa compound, a holy site for both Jews and Muslims.