Israel's Defense Ministry has found a novel way of overcoming cuts in military spending: selling off state-owned land in the vast Tel Aviv urban conurbation whose value has gone through the roof of late and moving military bases into the Negev Desert to the south.

One report says the land's worth at least $40 billion in a seller's market as commercial companies expand around Tel Aviv, Israel's largest city and its financial and industrial heart.

Already a huge military training base is under construction southeast of the biblical city of Beer Sheva, where eventually 10,000 personnel and 2,500 civilians will live and work.

"It will be the third largest city in the Negev, after Beer Sheva and Dimona," site of Israel nuclear reactor, says Lt. Col. Shalom Alfassy of the Defense Ministry.

Last week's decision to privatize Israel Military Industries, the Jewish state's oldest defense company and a leading weapons manufacturer, and relocate its factories in the Negev is another element in the massive relocation project.

Selling the site now occupied by state-owned IMI outside Tel Aviv could bring in around $5.7 billion.

In July, amid the perennial political wrangle over Finance Ministry efforts to push its longtime adversary the Defense Ministry into drastically cutting its budget by $2.3 billion, Mamon financial magazine observed that the problem could be solved by selling off large chunks of prime real estate owned by the military and the Defense Ministry in areas where there's a mushrooming demand for homes.

"The move could create room for tens of thousands of housing units on land that becomes available in central Israel where apartments are as essential as air to breath," declared Ohad Danos, chairman of the Real Estates Appraisers Association.

Construction on a large scale would "serve as a major help to spreading out the population and relieving population density in the center" of the country, he added.

Since Israel's been plagued by a housing shortage for some time, the suggestion won a lot of popular support. The Negev makes up nearly two-thirds of Israel's landmass, but less than 10 percent of its population.

Developing this vast area, and moving out large military bases sitting on prime real estate, has long been a key objective of successive government.

But it will mean uprooting some 40,000 Bedouin Arabs from their homes and the project is already stirring a growing controversy with human rights groups.

A few months ago, the Defense Ministry signed up for moving several bases in central Israel, the narrowest section of the country squeezed between the West Bank and the Mediterranean, to the south.

The IMI move from its current 1,875-acre site in the Sharon district to the Negev will open the way for the construction of 23,000 apartments to begin within five years. The mayors of the local neighborhoods want to use the land for urban parkland.

Ynet News, website of the mass circulation Yediot Ahronot Hebrew-language daily, reported the Israel Land Administration will transfer an initial $470 million to the Defense Ministry for the land.

The ministry will start raking in the big money when the land's put up for sale.

Apart from the Beer Sheva project, Israel plans to construct at least three other megabases in the Negev by 2020, a $9 billion program, largely funded by the private sector, that will move jobs and investment to the long-neglected south.

It's one of the biggest infrastructure projects since the Israeli republic was proclaimed in May 1948.

The Israeli air force has already moved out of Tel Aviv's Ben Gurion International Airport onto the expanding Nevatim air base there.

The Defense Ministry itself, known as HaKirya, "the campus," is also set to relocate from its site in central Tel Aviv to the Negev.

The Kirya, which sits on some of Israel's most expensive real estate, is a landmark. It's housed the ministry and military headquarters since the state was founded.

It's built on an historic colony of the Templars, the Knights who formed the core of the Crusader forces who fought the Muslims in the Holy Land in the 11th and 12th centuries.

When the Kirya moves south to one of the Negev megabases, the Tel Aviv location, including the ancient Templar structures, will become the Sharona commercial center with boutiques, restaurants and bars.