New Zealand’s prime minister, Jacinda Ardern, is being accused of a “lack of leadership” over an escalating land dispute between Māori and a construction company which plans to build 500 homes on sacred land in south Auckland.

Opposition to the project boiled over this week over when a group that had been illegally occupying the land was served an eviction notice.

The protest group has grown into about 300 people with police also increasing their presence. Seven protesters were arrested on Thursday night after they linked arms and chained themselves to a van to block part of the motorway near the city’s airport.

The site, called Ihumātao, is home to New Zealand’s earliest market gardens as well as being a significant archaeological site on land considered sacred by local Māori.

Fletcher Building is looking to develop around 500 homes on the land, which local Māori say was stolen from them after land wars with the British dating back to the 1860s. The protest group want the land given back to local Māori.

Protesters have implored Ardern to step in, including sending a letter directly to her.

However, she has so far said the government will not get involved.

“This is something obviously everyone wants to see resolution around, no one wants to see the kinds of disruption and outpouring of emotion [we have seen],” Ardern said.

“Everyone wants a resolution but ultimately it will have to come from mana whenua [Māori with historic rights over specific land].”

Protest leader Pania Newton told media that Ardern’s words showed “a lack of leadership” and showed “ignorance” about its treaty obligations.

“This is the revolution of our generation,” Newton said.

In 2017, the campaigners asked the government to address alleged breaches under the UN declaration of the rights of indigenous people. However, a later court ruling declined to overturn the decision to allow building at the site and land rights remain a controversial issue in New Zealand.

President of the Māori party, Che Wilson, said Ardern needed to “front up” and show “kindness” to the Ihumātao and its complexity.

“This is a complex issue and complexity requires leadership, it’s time for the prime minster to step up and take action and prove that she doesn’t shy away from Māori issues.”

The protest movement has caused division among Māori, with some close to Ihumātao saying the housing development could be good for their families. Well-respected elders accompanied police on Tuesday and asked for the occupation to end.

The chief executive of Fletcher Building Residential, Steve Evans, said that the company has committed to returning 25%, or eight hectares, of the land back to Māori and that the building project would take due care with the significance of Ihumātao.

• This article was amended on 30 July 2019 to correct the definition of mana whenua and to reinstate a paragraph about how the protest has caused division among Māori.