Jerusalem (CNN) -- The demolition of a hotel in East Jerusalem that has stoked tensions in the Middle East was a private matter, and the state of Israel was not involved in the decision, a spokesman for Prime Minister Benjamin Netanyahu said Monday.
"There should be no expectation that the state of Israel will impose a ban on Jews purchasing private property in Jerusalem. No democratic government would impose such a ban on Jews and Israel will certainly not do so," the spokesman said. "Just as Arab residents of Jerusalem can buy or rent property in predominantly Jewish neighborhoods in Jerusalem, Jews can buy or rent property in predominantly Arab neighborhoods in Jerusalem."
Israeli bulldozers demolished part of the Shepherd Hotel in East Jerusalem on Sunday, prompting swift condemnation from Palestinians.
The building plan, which was given final approval last year, was met with disapproval from the United States at the time which called for the Israeli government to put off any demolition.
On Monday, U.S. Secretary of State Hillary Clinton said the United States was very concerned about the demolition.
"In particular, this move contradicts the logic of a reasonable and necessary agreement between the parties on the status of Jerusalem," she said in a statement.
She continued, "We will continue to press ahead with the parties to resolve the core issues, including Jerusalem, in the context of a peace agreement."
A spokesman for U.N. Secretary-General Ban Ki-moon said the demolition "only serves to heighten tensions."
"It is deeply regrettable that growing international concern at unilateral expansion of illegal Israeli settlements is not being heeded," the spokesman said.
Such moves by Israel put at risk the chances of a negotiated solution to the ongoing conflict, he said.
Israel demolished part of the hotel as part of a plan to build 20 housing units for Jews in a predominantly Palestinian neighborhood of East Jerusalem.
The chief Palestinian negotiator, Saeb Erakat, denounced the action.
"The state of Israel is demolishing one Palestinian property after another in an effort to cleanse Jerusalem of its Palestinian inhabitants, heritage and history," he said in a statement.
He said such actions "undermine the two-state solution and negotiations process."
The United States had called on Israel to halt the housing project. Netanyahu had responded by saying "our sovereignty (over Jerusalem) cannot be challenged." The project was given final approval last March.
The Shepherd Hotel was built in the 1930s by a prominent Palestinian family and was purchased from the state of Israel in 1985 by American millionaire Irving Moskowitz, an avid supporter of Jewish building in East Jerusalem.
Moskowitz developed plans for the 20 housing units that sparked the hotel's demolition on Sunday.
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