About 15 residents have appealed to VCAT against Bendigo Council's decision to give the Australian Islamic Mission a permit to build the mosque on a two-hectare piece of land between two industrial zones.

On the final day of the hearing on Monday, Colleen Peterson, a town planning expert commissioned by the Mission's lawyers, said the proposed site was appropriate for the mosque, citing the Mission's estimate that Bendigo's Muslim population may grow to up to 375 people.

Lawyer for objecting residents, Robert Balzola, said while cross-examining Ms Peterson that there was "no demand" for the mosque, as there was a "practically non-existent" Muslim presence in Bendigo.

Given there were about 35 Muslims who visited makeshift prayer rooms at La Trobe University's Bendigo campus, a plan for the mosque was "creating demand, not meeting demand," he said.

"Given Bendigo is a regional centre, it is appropriate that the Muslim community looks to this facility for the future and may draw people from further afield for ceremonies," Ms Peterson replied.

Asked what she thought of the idea that the mosque was a development for "population attraction," Ms Peterson offered "no opinion" and said she found this "highly inflammatory."

Mr Balzola​ told tribunal president Justice Greg Garde and senior member Margaret Baird that VCAT should remit the decision to the council, which had not considered "blackletter environmental factors" of the permit application, including the social impact the mosque would have on the community.

The council, he said, should have assessed the social impact of the plan, given about 250 complainants had made 450 complaints against the plan to the council, he said.

Barrister for the Mission, Chris Townshend, QC, told the tribunal that the objectors had feared the area surrounding the mosque would become an "Islamic enclave" but had not specified what future "social impact and amenity consequences" this would have on Bendigo.

"Aside from the offensiveness inherent in the suggestion that the permit applicant has a hidden agenda and the gathering together of people of the one faith is somehow sinister ... the future use of surrounding land that would necessarily be subject to separate planning permission is irrelevant to this application."

He said in documents to the tribunal that the mosque would have a "positive social effect" of giving "Muslims of Greater Bendigo and beyond to worship, celebrate religious and community events, and generally come together."

Mr Townshend cited a 2013 VCAT decision which said town planning was "not a panacea for all perceived social ills" or involved in "moral judgements" but focused on the use, development and protection of land.

He said that the plan for the mosque was supported by the council which had "diligently assessed the application" for a permit and was not required to assess the social impact of the mosque on the community because it did not believe any arose here.

The Council, Australian Islamic Mission and resident objectors have agreed on a number of conditions for the mosque if VCAT upholds the permit to build it, including opening hours. They have also agreed the mosque would make no external loudspeaker announcements, and would limit worshippers to 375 people for prayers on Friday and twice a year at Eid, with a lower cap of 150 people at the mosque at all other times.

Justice Garde reserved the tribunal's decision.

- The Age