The 20-hectare E-Gate site on Footscray Road, two kilometres from the central business district, is about to be transformed into a new suburb with 10,000 residents and 50,000 square metres of commercial and retail space.

Mark Wizel from property agent CBRE said the unique, inner-city site could be worth as much as $500 million.

‘‘E-Gate is without doubt the most exciting, large-scale, high-density development opportunity in Melbourne,’’ he said.

‘‘If master planned and positioned correctly, strong interest in parts and or the whole site will be fielded from very aggressive and active Malaysian, Singaporean and mainland Chinese developers, not to mention coming at a time where many of the large, listed Australian developers are starting to secure major sites for long-term projects again.’’

Hay Property Group director Peter Hay said it could be the best development site in Melbourne.

‘‘There is just no more land that close to Melbourne any more,’’ he said.  ‘‘You could create a new suburb there ... it is a gem of a site, a ripper.’’

He said with interest rates low there would be no shortage of eager developers for the old railyards.

Boasting a concentration of employers and public transport services, central Melbourne is becoming a popular place to live. The number of residents within the CBD jumped an unprecedented 5400 in the year to June 2013 - a growth rate of 23 per cent.

The E-Gate development is in addition to the state government’s plans for 80,000 residents in the Port Melbourne, Fishermans Bend urban renewal zone and big growth in CBD, Docklands and Southbank apartments.

A $4 million business case for E-Gate went to state cabinet in January. Deloitte Touche Tohmatsu was paid $198,380 for work between December 17 and January 31 to provide commercial advice on E-Gate.

Work on the new suburb could begin as early as next year.

It is understood architect Bates Smart has provided the government with options for the site, including a town square leading to a bridge over rail tracks to North Melbourne train station, with higher-density development at the southern end of the site closer to the CBD. There are also options for a school on the site and public open space.

Planners have urged the site be an extension of North Melbourne rather than a ‘‘cookie cutter’’ outer-suburban development transplanted to the centre of town.

The development could be sold to private developers in one parcel or in parcels with staged development.

Opposition planning spokesman Brian Tee warned the project could be ‘‘a honey pot for developers ... But what [Premier] Mr Napthine must explain is where is the funding for the schools, public transport and health service to prevent E-Gate becoming an urban wasteland?’’

A spokesperson for Major Projects Minister David Hodgett said ‘‘a business case was submitted to the government in January and is currently under active consideration’’.

Melbourne University planning expert Alan March said Melbourne had the benefit of what could be described as planning experiments such as Docklands from which to learn.

‘‘Provision of open space, schooling, childcare ... trying not to have such a hard edge and the predominance of physical structures that are not really suitable for street life,’’ Dr March said. ‘‘You build into the DNA of the place the transport infrastructure that is there when people start to move in.’’

He said Melbourne City Council should also have a role in the development of E-Gate and not be brought in late, which is what happened with Docklands.

‘‘Is it going to be a fair place? Will there just be rich people there because it is expensive or will we be trying to provide for everybody?’’