The home of a Palestinian man behind a fatal attack on Israelis is to be demolished by Israeli authorities, even though it was built with compensation paid to them after one of their relatives was killed by an Israeli.

The entrances to the east Jerusalem home of Fatima Alqam, her husband Moussa and four children were sealed within days after her 21-year-old son killed seven people outside a synagogue in the settlement of Neve Yaacov.

Khayri Alqam was shot dead in the January 27 attack and his family later received a demolition order for their apartment, under a long-standing policy to punish the families of Palestinians who kill Israelis.

"We hope that it won't be torn down. A lawyer has been appointed and we are waiting" for the appeals process, said one of the assailant's relatives who requested anonymity, fearing reprisals.

Khayri Alqam shared the name of his grandfather, who was killed in 1998, allegedly by an Israeli extremist.

An Israeli man was arrested in 2010 for that attack and a series of other murders of Palestinians, although he was later released and ultimately no one was convicted over the killing.

"Who do we complain to?" asked the relative. "He must be punished. We were wronged in 1998 and wronged today."

The accused Israeli in that case won the vocal support of Itamar Ben-Gvir, who has risen from extreme-right agitator to his current position as Israel's national security minister.

An adviser to the politician, whose portfolio includes policing, did not respond to a request from AFP to comment on Ben-Gvir's relationship with the accused.

At the time of the killing, the Alqam family said they were visited by then-Israeli president Ezer Weizman, and received compensation from the state over the murder.

They used some of the money to build their home in the al-Tur neighbourhood of annexed east Jerusalem and were living on the second floor of the small apartment block, with the other floors taken by relatives.

- 'Military checkpoint' at home -

Nadia Daqqa, a lawyer with the Israeli rights group HaMoked, said that whether the state paid for part of the construction makes no difference to officials.

"For them, the house was where a Palestinian terrorist lived," she said.

When Israeli forces demolish one apartment within a block, they knock down the walls to make it uninhabitable.

While successive governments have implemented the demolition policy, there has usually been a period after such an order is issued to allow residents to appeal.

That changed with the Alqam home, which under the administration of Prime Minister Benjamin Netanyahu was sealed within 48 hours of the January 27 attack.

"These changes began with the new right-wing government," said Daqqa, who represents clients facing demolition orders.

"And the demolition policy was expanded to include cases in which there were no deaths, or operations (attacks) carried out by children," she added.

Last month the cabinet announced that the family home of a 13-year-old boy who shot and wounded two Israelis in the Silwan neighbourhood of east Jerusalem would also be sealed.

In al-Tur, Fatima and Moussa Alqam have now moved in with his mother in the same building as their sealed apartment, along with their children, aged six to 16.

The four-storey building was like a "military checkpoint" according to Moussa Alqam, with Israeli forces stationed at the property for more than two weeks.

- 'Collective punishment' -

A day after the deadly January attack, Israel's security cabinet announced a slew of retaliatory measures.

This included revoking the rights to social security of "the families of terrorists that support terrorism", although the Alqam family has yet to lose such benefits.

Fatima Alqam said her son had no ownership of their home and his grandmother held the property deed.

But under Israeli legislation, a demolition order can be issued to a relative of an attacker and amounts to a form of "collective punishment", Daqqa said.