Slum-dwellers who last week erected a tent city in southern Jerusalem to press their demand for low-cost housing today agreed "in principle" to evacuate the site in exchange for promises of privately financed housing.

The 38 families of Ohel Moreh, a campsite whose name is a play on the name of a controversial West Bank settlement established by ultranationalists, agreed to move after two wealthy Israeli businessmen promised to raise $600 million to build 40,000 low-cost rental apartments.

Nessim Gaon, a Geneva-based millionaire and president of the World Shephardi Federation, and Knesset (parliament) member Shmuel Flatto-Sharon agreed to try to raise the funds after meeting with Housing Minister David Levy.

Flatto-Sharon, who financed Ohel Moreh and mediated the slum-dwellers' dispute with the government, said that if the government fails to move quickly to provide more subsidized housing for Israel's poor families, he will establish five more tent cities across the country as a protest.

As the two sides continued negotiations, the government appeared to have defused a potentially explosive showdown between police and the Ohel Moreh squatters, who had threatened to forcibly resist attempts to evict them from the campsite.

As a final concession the squatters were demanding immediate housing for those families who had no place to go after moving from Ohel Moreh.