Speaking in Parliament last week, Planning Minister Justin Madden said it would be irresponsible to proceed with the UGB proposal without a plan to fund community infrastructure.

"We cannot and we will not move the urban growth boundary without securing the revenue to pay for new schools, roads, community facilities and services, public services and health care."

He said Opposition Leader Ted Baillieu had "killed off" the expansion of the urban growth boundary by voting against more land being released for Victorian families to pursue their dreams. "We will obviously consider our options, but we believe the growth area infrastructure contribution legislation in its current form was the fairest way to help pay for the infrastructure needed by families who will move to some of Melbourne's newest suburbs.

"The Opposition had many, many opportunities to put forward its own plan, but comprehensively failed to put up an alternative plan."

The bill was defeated 19 to 18 after the Liberal, Greens and Nationals joined together to vote against it.

MPs who had been supporting their communities in opposing the bill were pleased with the result.

"GAIC has finally bitten the dust, which is great news for the thousands of landholders who would have faced financial ruin if Labor's 'unfair plan' succeeded," Opposition planning spokesman Matthew Guy said.

"Labor's attempt to link the GAIC bill's passage to the urban growth boundary changes and hold the development industry to ransom is further proof of its arrogance."

Taxed Out chairman Michael Hocking said: "We are relieved that the GAIC bill has been defeated. We are also disappointed that the Victorian Labor Government and, in particular, Planning Minister Justin Madden chose to show no respect for the grave concerns of a large number of organisations, including landowner groups, peak industry bodies and growth areas councils and attempted to push this deeply flawed policy through Parliament."

Kalkallo landowner Ken Greenwood said he and wife Anne were delighted with the outcome and hoped the bill would not be resurrected.

"We can now sell our land to another farmer or speculator and are no longer confined with selling it to a developer."

Mickleham landowner Rosetta Barilla said her concern was if VicRoads put a freeway, proposed Outer Metropolitan Ring Road, through her property.