The lots are part of a $175 to $200 million golf course proposal, and have the potential to increase Greens Beach's population to 2400.

The council's scheme originally allowed for up to 120 of the lots to be developed before reticulated supply, estimated to cost between $5 million and $8 million, was brought to the town from Beaconsfield.

In June, a meeting with the council, the state government, federal representatives, the developers and TasWater revealed that the development would not be viable if the water was required.

Four months later, Local Government and Planning Minister Peter Gutwein encouraged the council to change its scheme allowing the developers to use rainwater tanks only.

West Tamar mayor Christina Holmdahl said she believed the council had been "backed into a corner".

"I am bitterly disappointed that the state and federal government didn't see fit to understand the long-term benefits to the Northern part of our municipality with reticulation being connected," Cr Holmdahl said.

Councillor Tim Woinarski said the precarious situation meant if the council knocked back the suggested amendment, it would be to the detriment of the area's economy.

"It would see the loss of 715 jobs and $450 million in economic activity," Cr Woinarski said.

The proposal was approved, with councillor Geoff Lyons voting against the amendment scheme motion.

A motion from councillor Peter Kearney was later passed, highlighting the council's continued desire for reticulated water at the town.