MOSCOW, March 18 (Reuters) - The Israeli and Palestinian leaderships have no alternative to eventual direct negotiations, UN Secretary-General Ban Ki-moon said on Thursday, repeating criticism of plans for more Jewish homes near East Jerusalem.

Ban said he hoped a meeting of the international quartet of Middle East mediators in Moscow on Friday could advance troubled peace efforts at a crucially important time.

Israeli plans to build 1,600 more homes for Jews on occupied West Bank land annexed to Jerusalem have sent sparks flying between Israel and the United States, and cast doubt on U.S. plans for indirect proximity talks.

Underscoring the problems in getting peace efforts back on track, Ban said that indirect talks between Israel and the Palestinians in themselves were not the best scenario.

It is still worth a try, he told Ekho Moskvy radio. However, he added: Proximity talks should eventually lead to direct negotiations.

There is no alternative to direct negotiations, said Ban, who heads to the Middle East after Friday's meeting with US Secretary of State Hillary Clinton, Russian Foreign Minister Sergei Lavrov and EU foreign policy chief Catherine Ashton.

The quartet meeting is being held at a crucially important time, he said.

Ban also reiterated criticism of the plans for more homes for Jews near East Jerusalem, which Israel announced last week during a visit by US Vice President Joe Biden. We have been very much frustrated by what has happened on the ground, said Ban. Israel has announced a new settlement plan ... that has been strongly condemned by the quartet.

The global powers have been frustrated be not being able to see progress on the ground, he added.

Palestinian President Mahmoud Abbas has indicated there would be no proximity talks unless Israel froze all settlement building. (Writing by Steve Gutterman; editing by David Stamp)