The Jerusalem District Court also ordered East Jerusalem Mayor Nir Barkat's plans to retroactively legalize 66 illegal homes put on hold until projected park plans replacing the demolished homes become finalized, Ynetnews reported.
The plan allows for the houses to be torn down with the Arabs living in them given permits to build new ones on the other side of the neighborhood at their expense.
"We will meet again when the plans are approved in 2012-2013. Debating it today is just unnecessary," Judge Yoram Noam said during the hearing.
Arab residents of al-Bustan have filed their own plans. A planning and construction committee will decide which plan to approve.
"I am pleased with the judge's decision not to carry out the demolitions," said Dr. Ziyad Kawar, who represents the residents. He said their scheme offers to turn the neighborhood into "a nice place to visit, with infrastructure, coffee shops, hotels, paths and running water."