The Israeli government is set to approve construction grants for 9,500 new hotel rooms to be built in West Bank settlements and near Jerusalem for the first time, in order to ease the tourist load on the already overbooked facilities.

The chief construction center is set for the city of Ma'aleh Adumim, east of Jerusalem, and in the Gush Etzion settlement bloc south of the city.

The move comes amid Tourism Ministry projections of a worsening shortage in accommodation in Jerusalem in upcoming years.

Up until now, such "administrative grants," which provide state support for 20 percent of construction costs for hotels with at least 25 rooms, have been doled out to so-called "national priority areas" only within Israel proper.

However, in 2007, a special government-appointed committee included the areas Israel came into control of after the 1967 war as eligible for such grants.

The budget for the construction grants stands on 19 million U.S. dollars in 2012.

The inter-ministerial committee will tender its recommendation to the cabinet, which is expected to approve the grants in upcoming weeks. This will be the first time the grants would be distributed to construction in the West Bank.

The grants would finance construction projects for three years starting January 2013.

According to a report on Tuesday, Israel spent 275 million dollars on settlements in 2011, and it was reported last week that as of July 2012 there are 350,150 Jewish settlers living in over 120 towns and villages throughout the West Bank.

Much of the international community, as well as peace and left- of-center groups in Israel, vehemently oppose settlement expansion and growth.

In 2009, Prime Minister Benjamin Netanyahu announced that Israel would impose a 10-month freeze on construction in the West Bank settlements in a bid to restart stalled peace talks with the Palestinians.

However, at the end of the moratorium in September 2010, the Palestinians suspended direct peace talks, citing renewed settlement building in West Bank. They resist to renew the talks with Israel until the construction comes to a complete halt.