Is it permissible to build a mosque or a Zawiya on a plot of land disputed between the family and the municipality, designated for urban planning, and would that be considered an encroachment on a public road?

It is not permissible to turn a road into a mosque if it harms people, especially if it constitutes an encroachment on public roads. If the municipality's decision to expropriate your land is just, then it should not be defrauded by converting it into a mosque. However, if it is unjust, then it is permissible to convert it into a mosque if it does not harm the road, and you will be rewarded for your intention. Religion enters into all affairs of life, and one should intend obedience and drawing closer to Allah Almighty through this action.