RAMALLAH, West Bank, Aug 2 (Mohammed Assadi/Reuters) - The din of earth-movers leveling the hilly terrain of Ramallah for construction is unremitting as modern buildings shoot up all over the West Bank city.

Once a mere village on the outskirts of Jerusalem, Ramallah has seen its population double in the last 10 years and land prices surge, in part due to the fact it falls within the 40 percent of the West Bank where Palestinians can build without Israeli permission.

The Ramallah construction boom is one of the most obvious signs of West Bank economic growth estimated at an annual rate of 8 percent -- which Palestinian policymakers attribute to relative stability and Western donor support to the Palestinian Authority.

Israel has occupied the West Bank since 1967.

But unlike Gaza, where Palestinians are packed into a slowly crumbling city, Ramallah has no shortage of concrete and steel reinforcing rods -- construction materials barred from the Gaza Strip by an Israeli blockade, on the grounds they can be used for military purposes by the enclave's Islamist Hamas rulers.

Ramallah has swallowed the neighboring town of El-Bireh and is home to 83,000 Palestinians. As traffic queues grow longer, the Palestinian Authority is expanding the roads to cope.

Developers say property prices have risen by 30 percent in the last two years. Buyers expect prices to go higher, though accurate price surveys do not exist.

A home in Ramallah is now twice as expensive as in Nablus, an industrial city 45 minutes by car to the north.

But that did not stop Ibrahim Sowan, a plastic surgeon from Nablus, from deciding to buy in Ramallah.

I know that it is expensive, but if I want to sell it the price may be even higher, he said. I have a clinic in Ramallah so I bought an apartment and I plan to settle here, he said.


TREMENDOUS DEMAND

Israel says it has helped revive the Palestinian economy in the West Bank by removing checkpoints, movement restrictions imposed during the Intifada, or uprising, that erupted in 2000 in the Israeli-occupied territory.

The Intifada partly explains why Ramallah has grown so rapidly. Many Palestinians who worked here but lived elsewhere moved in to avoid the hassle created by Israeli checkpoints, which in the worst days of the violence could seal off a Palestinian town or village for weeks.

Today, Ramallah's buoyant economy continues to draw Palestinians from other West Bank towns where jobs are fewer. The checkpoints that still generate lengthy traffic queues are those that guard access to Jerusalem.

Ramallah's built-up area has grown five fold since the peak of Israeli-Palestinian violence in 2002, said Ahmad Odaly, head of the Palestinian Engineers Union.

There is tremendous demand for apartment buildings, he said. An apartment in a wealthy area today costs $200,000.

Israel exercises complete control over 60 percent of building in the West Bank under interim peace agreements concluded in the 1990s with the Palestinian Authority. The peace process has yet to produce the state the Palestinians aim to establish in the West Bank, the Gaza Strip and East Jerusalem, where they hope to set up their capital.

Until it does, Ramallah remains the de facto capital and seat of Palestinian government in the West Bank.

A new, $500 million mortgage fund operated by the Palestinian Authority's Palestine Investment Fund (PIF) is expected to give a further boost to the residential property market. It is set to start lending this year.

Construction activity goes beyond the residential sector. The PIF last week began work on a $400 million commercial center comprising 13 towers which will be some of the tallest in Ramallah.

The Ersal Center has drawn investment from a Saudi Arabian firm, The Land Holding, which has a 10 percent stake. It is not the only Gulf Arab firm investing in Ramallah and its outskirts.

The Qatari Diar Real Estate Investment Company has a stake in Rawabi, a completely new town being constructed in the hills outside Ramallah at a cost of $800 million.

Some developers see demand growing for several years to come. I could hardly find a plot of land to buy, said Isam Rimawi, a developer. (Editing by Tom Perry)