A controversial plan to build thousands of apartments on industrial land in Marrickville may still proceed despite the NSW government announcing it will hand planning powers along the Bankstown rail line to local councils.

The Planning Minister, Anthony Roberts, met with the mayors of the Inner West Council and the City of Canterbury Bankstown last week, and committed to allowing the councils to lead the planning for changing land uses along the rail corridor.

The Sydenham to Bankstown corridor. Credit:NSW Government

However the decision to hand responsibility for strategic planning along the rail line, which is to be converted to a higher-frequency 'metro' rail service by 2024, was met with alarm by developer groups, who said it could jeopardise future housing supply.

The Labor Inner West mayor Darcy Byrne said the return of planning control to councils would derail property giant Mirvac's rezoning proposal for apartment towers along Carrington Road, Marrickville, near the Cooks River.