The correct answer is C) to establish villages for the Pueblos.
Pueblo grants were used to establish villages for the Pueblos.
To encourage people to move and settle in the territory of New Mexico, the government of Spain gave land grants so people could find attractive to move and inhabit those territories. The idea was to make those lands habitable and productive. Some people took the opportunity and created ranches to breed domestic animals and raised cattle.
The other options of the question were A) only in Arizona during the Spanish Period. B) to settle communities north of Santa Fe. D) to set aside community land for grazing.