Major development in Bungendore has come to a grinding halt as the council investigates whether there is enough water to satisfy the growing community's needs.
Queanbeyan-Palerang Regional Council announced in January that residential planning proposals relating to Bungendore and the immediate surrounds would not be referred to the minister for a determination until the groundwater investigation had been completed.
A council spokesman said it was a complex process to find a new site suitable to draw water from.
"Around 10 sites were initially chosen and then from here, two prospective production sites have been identified," the spokesman said.
"These sites may still prove to be unsuitable either in terms of yield or quality. Council is interested in water quality and this will be a key assessment criteria. Ideally, we would be hoping for a quality profile similar or better than that of the adjacent alluvium water source."
Planning proposals will not be finalised or proceed to the next step until the groundwater investigation is complete. Background work on existing proposals will continue.
Two existing proposals are affected, one for East Bungendore and one for North Bungendore. Draft planning proposals are also affected.
The council spokesman said if water was not found, it would be reflected in the review of the Bungendore Land Use Strategy and Structure Plan, which is being undertaken concurrently with the water investigation.
Both are expected to be completed by August.
The council spokesman said while they had been "mindful of the groundwater situation" for years, the current major residential planning proposals had brought forward the process.
Professional engineering and development company SMEC has submitted two planning proposals in Bungendore for clients, one of which is affected by the delay.
ACT and southern NSW urban development manager Peter Evans said they were confident there was enough water to service the area.
"SMEC undertook a detailed groundwater investigation prior to submitting the planning proposal to give our client confidence in the development," he said.
"Our extensive investigations supported that there was adequate water in the underlying aquifers."
Mr Evans said while the water sourcing was factored into their client's East Bungendore project, the investigations had delayed the development.
"Our planning proposal was approved by the former Palerang Shire Council in December 2015 and has been waiting on the water investigations before being processed by the NSW Department of Planning," Mr Evans said.
He said project delays add further costs and have an impact on the final development costs.
"We hope that the works will be complete by the end of March this year," he said.
The council administrator Tim Overall said Bungendore continued to be subject to residential development pressure.
A council spokesman said the engagement for the two development bore proposals had been issued.
"Council expects field works to commence within the next three weeks," the spokesman said on Tuesday.