JERUSALEM, Oct 18 (Reuters) - Israel on Thursday issued a detailed plan for the building of some 800 new homes on annexed land in the West Bank that is certain to attract further international condemnation of its settlement policies.

A planning committee issued a call for bids from contractors to start building 797 housing units on the western slopes of the urban settlement of Gilo, an area that Israel seized in the 1967 Middle East war and later declared part of Jerusalem.

The annexation has never been recognised internationally.

Palestinians want to create a state in the occupied West Bank and the Gaza Strip, with East Jerusalem as its capital.

But they say Israeli settlement building around the city, such as at Gilo, which is home to 40,000 Israelis and lies between mainly Arab East Jerusalem and the West Bank city of Bethlehem, will cripple the viability of any future state.

Israel cites historical and Biblical links to the West Bank, which it calls Judea and Samaria. Some 500,000 settlers live in territory seized in 1967.

Previous Israeli announcements and subsequent settlement building have always drawn worldwide rebukes, including from Israel's main ally, the United States.

Hagit Ofran of the Israeli anti-settler group Peace Now, said construction could begin within a few months.

"The government could stop the process before building begins but is taking advantage of the upcoming elections in order to set facts on the ground and will make the possibility of peace with the Palestinians even harder to achieve," she said.

Prime Minister Benjamin Netanyahu has called elections for Jan. 22.