High above Bel Air, Nile Niami is looking down on the tiny mansions of mere millionaires as he stands on a plywood platform that will soon be the roof deck of the house he's selling for $500 million. When you expect a half billion dollars, everything has to scale up, including the views, and from this hilltop, they span 360 degrees—encompassing the San Gabriel Mountains, the Pacific Ocean, and, today, Niami's Rolls-Royce Phantom convertible, parked in the driveway below. The 47-year-old developer is taking it all in . . . and explaining why he believes the property is not really so expensive when you think about it.

The home itself, when it's finished in 2017, will have five swimming pools, a casino, a nightclub with a VIP area, a lounge with jellyfish tanks in lieu of walls and ceilings, and various other amenities that might seem excessive at the Ritz-Carlton Abu Dhabi. It will be more than 100,000 square feet, twice the size of the White House. So the price works out to about $5,000 per square foot, which, Niami notes, is less than half what several billionaires have paid for their casino-less Manhattan penthouses. "We have a very specific client in mind," says Niami, who is wearing a slim-fitting polo shirt and a Breguet watch. "Someone who already has a $100 million yacht and has seven houses all over the world, in London and Dubai and wherever."

Niami rarely gives interviews, which is perhaps a wise choice. Brusque, blunt, and palpably cologned, he isn't one to make apologies about his new project's size or price tag. "To be able to say that the biggest and the most expensive house in the world is here, that will be really good for L.A.," he says. That's not necessarily a universally shared sentiment. He's been unpopular in Bel Air since last fall, when he sliced off the top of a hill in order to enhance the panoramic vistas on the four-acre lot. For weeks, a convoy of dump trucks snaked up and down the narrow streets, removing approximately 40,000 cubic yards of dirt. And although Niami has avoided the public legal scuffles that have ensnared other high-rolling Los Angeles developers who build on spec (construction has been frozen on Mohamed Hadid's spaceshiplike megavilla nearby because of permit violations), this $500 million listing has marked him as the embodiment of the market's unbridled extravagance.

The living and dining areas will open onto a courtyard with palm trees.

When the house's asking price was announced last May, some people figured it was an absurd marketing ploy, since if the property fetches anything close to $500 million, it will obliterate the current world-record price of $221 million, for a London penthouse. But absurdity is all relative in today's gigamansion market—particularly in L.A., where previous milestones such as the $85 million sale of the 123-room Spelling manor in 2011 are beginning to look quaint. (That property is about half the size of Niami's, and its current owner, the British-born heiress Petra Stunt, reportedly put it on sale last year for $150 million.) Right now, speculative developers in particular share one prevailing mantra: If you overbuild it, they will come.

The main thing to understand about L.A.'s growing crop of no-expense-spared spec homes is that they are not actually homes, in the usual sense of the word. Most buyers live on other continents and visit these properties for only a week or two each year, using them mainly as places to park their wealth. After all, in an era when a Cézanne painting can fetch $250 million, a massive trophy estate in Bel Air might seem like a perfectly sensible investment to a billionaire sheik or oligarch who's looking to keep his money safe from a grabby despot back home. And sure enough, for these clients, "bigger" and "better" are generally synonymous. Last year, when Niami was selling a 32,000-square-foot manse in the Holmby Hills section of L.A., he discovered that, despite its four-lane bowling alley and indoor pool, many potential buyers wanted more parking and bigger staff quarters. "It only had a five-car garage, and everybody complained," he says.