Israel reissued Tuesday a call for tenders for settler homes in annexed east Jerusalem in a move said likely to hike tensions as Washington struggles to salvage crisis-hit peace talks, an NGO said.

Peace Now's Hagit Ofran, confirming the tenders were for 708 homes in Gilo, a settlement neighbourhood of Arab east Jerusalem, saying "the ministry of housing is trying to forcefully undermine the peace process... and (US Secretary of State) John Kerry's efforts to promote it.

"This morning, the Israel Land Authority announced this project, which is actually a renewed tender which was published (in two parts) last year but found no bidders," she told AFP.

Israeli army radio, which first reported the news, said the tenders had been reissued under conditions significantly better than last year, making it more likely they would be taken up.

Israeli NGO Ir Amim, which supports an "equitable" sharing of Jerusalem, described the tenders as "a poke in the eye of both the Palestinians and the Americans," the radio said.