Israel is moving forward on the construction of hundreds of new settler homes in a sensitive east Jerusalem neighborhood, the country's Housing Ministry and a settlement watchdog group said Sunday.

The Housing Ministry on Sunday opened up tenders for more than 1,200 new homes in the Givat Hamatos area of Jerusalem. The settlement watchdog group Peace Now and other critics say construction there would seal off the Palestinian city of Bethlehem from east Jerusalem, further cutting off access for the Palestinians to the eastern sector of the city, which they claim as capital of a future state.

The move may test the ties with the incoming administration of President-elect Joe Biden, who is expected to take a firmer tack against Israeli settlement expansion after four years of a more lenient policy under President Donald Trump.

Brian Reeves, a spokesman for Peace Now, said the move allows contractors to begin bidding on the tenders, a process that will conclude just days before Biden's inauguration. Construction in the area could then begin within months.

``This is a lethal blow to the prospects for peace and the possibility of a two-state solution,`` between Israel and the Palestinians, Peace Now said in a statement, adding that Israel was ``taking advantage of the final weeks of the Trump administration in order to set facts on the ground that will be exceedingly hard to undo in order to achieve peace.''