JERUSALEM (Reuters) - Israel razed an inhabited Palestinian home in East Jerusalem on Tuesday for the first time in eight months, effectively ending an unofficial demolition freeze imposed under U.S. pressure to revive peace talks.

A Palestinian boy stands near the ruins of a home that was razed in East Jerusalem's Beit Hanina neighbourhood July 13, 2010. REUTERS/Baz Ratner

A Reuters photographer witnessed a Palestinian family removing its belongings from the house in East Jerusalem’s Beit Hanina neighborhood before an Israeli excavator tore into the dwelling.

Israel’s Jerusalem municipality said the home, owned by the Rajabi family of seven, was built without a city permit.

The demolition seemed certain to draw a new wave of international criticism of Israeli policy toward Palestinians in East Jerusalem, an area captured in a 1967 war and annexed by Israel in a move that has not won world recognition.

The home was razed a week after Prime Minister Benjamin Netanyahu held talks with U.S. President Barack Obama in Washington to patch up relations strained by Israeli settlement policy in East Jerusalem and the occupied West Bank.

“They can build hundreds of settlements but I’m not entitled to live in a shack?” said Linda al-Rajabi outside the demolished dwelling she shared with her husband and their five children.

In Washington, Netanyahu promised Obama “concrete steps” -- confidence-building measures -- within weeks to try to coax the Palestinians back into direct peace negotiations. Indirect talks began under U.S. mediation in May.

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Commenting on the demolition, Yasser Abed Rabbo, chairman of the Palestine Liberation Organisation’s Executive Committee, said the United States had promised “it would prevent any provocative measures in Jerusalem.”

Palestinians now wanted to know, he said, just “how the Americans will act...because things have started to escalate after Netanyahu’s visit to Washington.”

The United States, which is sending its Middle East mediator George Mitchell back to the region later in the week, had publicly urged Israel not to demolish Palestinian homes built without permits.

Palestinians, who want East Jerusalem as the capital of a future state in the West Bank and Gaza Strip, say it is impossible to obtain construction approval from Israeli authorities.

UNOFFICIAL FREEZE

Israel had refrained from implementing demolition orders since November in Jerusalem, a holy city at the heart of the Israeli-Arab conflict, after U.S. pressure not to take action that could jeopardize peace efforts.

But earlier on Tuesday, Israel razed two unfinished Palestinian homes and part of a factory in East Jerusalem.

Dozens of armed border police guarded an excavator as it tore apart the foundations of the cement structures in the Issawiya section of East Jerusalem.

Activists with the Israeli Committee against House Demolitions, a European-funded group that monitors the issue, said nobody lived in the buildings which were still under construction.

Netanyahu intervened several months ago to postpone city plans to demolish about 20 homes in another part of East Jerusalem, where the Israeli municipality is planning a new housing project that has raised international concern.