Where exactly is this village? Is it on China's side, or just on land that India also considers to be Indian? Or not even that?
With AP dispute, it is an inverse of AC dispute (AP dispute opened by China in the 1950s BECAUSE of India opening AC dispute). Naturally the situation is almost a total inverse here.
AP side - India has total de facto control of everything running up to mutually agreed "LAC". This "LAC" is north of what China claims ... a claim that was only created after India made a claim on Aksai Chin and surely in a mirror claim to India's in the 1950s as I've mentioned many times.
China building this new village is a move to push Modi towards giving up AC claims. If India formally drops AC claims, China most likely will drop AP claims unless the diplomatic relation between the two nations decline much further. Until India stops claiming AC by either demarcating the border with China along the LAC as China's offered in the past or at least signing total buffer at Ladakh side, China will continue the provocations on AP side.
I've said this months ago this is going to be China's play along with talks with Bhutan and releasing photos of Galwan clash to politically isolate and expose Modi. It's China's three pronged approach to a situation where China wants to resolve AC dispute to its favour but has since India agreeing to buffer, run out of active measures. Any use of PLA will simply dissolve India's obligation to observe buffer agreements during a period where there is no escalation. I say that because India can simply choose to dissolve that agreement if it chooses so and of course it chooses so when it considers itself to have an advantage in a military and diplomatic sense.
So first with this new village, we should establish where it is before any more commenting on the topic. If it's on China's side, then it's fine. If it's between perception of border ie between where India considers border and beyond where China controls, this would be the equivalent of India building a village right inside Aksai Chin.