The work brought a rare glimmer of hope to a territory that remains devastated a year after the fighting.
The long-awaited reconstruction started in Shijaiyah, one of Gaza's areas that was hardest hit during the 50-day war between Israel and the Islamic militant Hamas group.
"Thank God!" said Sharif Harara, 50, who stood under the sun as the workers laid the foundation of his new residence. "After a year of suffering in rental homes, our God brought his mercy."
Over 2,200 Palestinians, including hundreds of civilians, and 73 people on the Israeli side were killed in the fighting.
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The war also destroyed 11,900 homes and damaged about 140,000 dwellings, according to the Palestinian Minister of Public Works Mufeed al-Hasayneh, whose ministry oversees the rebuilding.
One year later, thousands of houses with minor or moderate damage have been repaired under strict guidelines agreed to by Israel, the Palestinian Authority and the United Nations. But so far, no new homes have been built to replace those that were completely destroyed.
Shijaiyah is one of Gaza City's most densely populated and impoverished neighborhoods. Entire city blocks were laid to waste there in fierce fighting between hundreds of Hamas gunmen and Israeli troops.
The first houses are being rebuilt as part of a Qatari-funded project that will see 1,000 housing units reconstructed. For residents in Shijaiyah, where entire blocks remain flattened, it was a rare sign of progress and hope.