Israel is preparing to build more than 1,000 new settler homes in east Jerusalem as the United States strives to revive dormant Israeli-Palestinian peace talks, according to an non-governmental organisation.

Danny Seidemann, director of Jerusalem settlement watchdog Terrestrial Jerusalem, said on Wednesday that contracts for 300 homes in the northeastern settlement of Ramot were signed and another 797 plots were to be offered for sale in the southern Jerusalem settlement of Gilo, near the city of Jerusalem.

Both are in mainly-Arab areas of the holy city.

Seidemann said that the plans were approved last year before Israeli Prime Minister Benjamin Netanyahu quietly ordered a settlement freeze, but the latest steps in their implementation were leaked to media by the office of Uri Ariel, the Housing and Construction Minister.

"This does not mean that the freeze is over, it does mean that Netanyahu's minister of construction is trying to achieve that," Seidemann said.

Force of hand

Seidemann said that Ariel was seeking to force Netanyahu into either giving a green-light or halting the work.

Although the freeze was never officially confirmed, NGOs said that Netanyahu did not want to be seen as hampering US Secretary of State John Kerry's initiative to breathe fresh life into moribund peace efforts.

"This is an attempt to force Netanyahu's hand," he said.

The news came less than a week after Kerry's latest round of talks with Israeli and Palestinian leaders on his fourth visit to the region since he took office in February.

On Sunday, he unveiled a $4bn US plan to boost the Palestinian economy but an adviser to the Palestinian President Mahmoud Abbas said that the leadership would "not offer political concessions in exchange for economic benefits."

Abbas himself called on Israel to "end the occupation of our lands", evacuate settlements and free Palestinian prisoners."

The Palestinian leadership wants a total freeze on Israeli settlement construction before it resumes peace talks with Israel, which have been stalled for almost three years.