Western Sydney could be the next area to benefit from the New South Wales government's focus on updated transport infrastructure, with the State government announcing the preferred route for project worth in excess of $1 billion.

The government this week announced the preferred route for the Parramatta Light Rail project, which it says will provide better transport links between the Parramatta CBD and other western Sydney hubs such as Olympic Park, Westmead Hospital, Western Sydney University and Strathfield.

The announcement comes just weeks after the route of the next stage of the Sydney Metro rail project was announced.

The main spine of the preferred light rail route will run from Westmead to Strathfield via the Parramatta CBD, and incorporating Camellia and Sydney Olympic Park.

A light rail line will also branch to Carlingford, replacing the existing heavy rail shuttle.

"This will be a game changer for Sydney’s second CBD – the preferred route provides the most opportunity for new jobs and urban renewal,” NSW Planning Minister Rob Stokes said.

According to the government, $1 billion has been set aside for the project, with additional funds to be levied by placing a Special Infrastructure Contribution (SIC) on residential developers.

The SIC would see developers in the area near the preferred route be required to pay around $200 for every square metre of  gross floor area (GFA) of new residential development.

That charge has been questioned by development lobby group Urban Taskforce, who claim that it could add tens of thousands of dollars to the price of new dwellings.

“The Urban Taskforce is concerned about the proposed Special Infrastructure Contribution of $200 per square metre of GFA of new residential developments. While providing funds for the light rail itself the contribution will also increase the cost of housing,” Urban Taskforce chief executive officer Chris Johnson said.

“A 100 square metre apartment will clearly have an extra $20,000 added to its cost. The danger of adding a high contribution amount is that development may not be economically viable and so funds will not flow to the infrastructure,” Johnson said.

Construction on the Parramatta Light Rail project is expected to start in 2018.