A $1.5bn plan to ease a housing shortage in the West Bank and Gaza Strip has been unveiled by the Palestine Investment Fund (PIF).

The PIF, which manages the territories' money, says 30,000 new homes will be built next year.

The houses will be sold to low-income families who will be able to apply for mortgages offered by a new bank being set up to support the scheme.

Buyers will be offered mortgages on better terms than on the open market.

A ceremony marking the foundation of al-Amal Mortgage Finance Company was attended by the Palestinian Authority President Mahmoud Abbas and the former British prime minister, Tony Blair.

Al-Amal means "The Hope".

"It would be a transformation project by all standards," the chief executive of the PIF, Mohammad Mustafa, told the BBC World Service.

"It's only 10% of the total demand expected for the coming 10 years but nevertheless I think it's a very good start."

Growing demand

The PIF has estimated that 470,000 new houses will be needed in the West Bank and Gaza Strip within the next decade.

Despite the state of the economy, Mr Mustafa says he expects few people living in the West Bank and Gaza Strip are expected to default on their payments.

He explained that while the situation was not easy by any standard, people living in the terroritries paid a lot of attention to issues related to their personal home.

"People here think twice about defaulting," he said. "It's a symbol of status. It's a symbol of dignity."

The mortgages are being funded by the PIF, the International Finance Corporation, the US Overseas Private Investment Corporation and the Bank of Palestine.

There is a growing demand for places to live in the West Bank and Gaza Strip as the population increases.

The number of people living in the territories has grown by almost a third in the decade since 1997, according to figures from the statistics office.

"There is a need for houses to accommodate the natural expansion of the population," said Helge Kvam of the International Committee of the Red Cross in Jerusalem.

However, "it is hard to get permits to build homes", he said.

(BBC)

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