South East Water is exploring a water-saving concept for Fishermans Bend in Melbourne's inner south, which would give up to 80,000 future residents a financial incentive to reduce their water consumption.

Called "rainwater micro-trading", it has never been attempted in Australia and is similar to solar energy systems, whereby households save on power costs by selling electricity back into the grid.

Development plans for Fishermans Bend stipulate that every residential building in the suburb must have a rooftop rainwater tank.

These towers proposed for Fishermans Bend would be required to have rooftop rainwater tanks.

The tanks will serve two roles: to provide water supply to occupants, and to capture stormwater to reduce the risk of flooding from heavy downpours, which are expected to become more likely with climate change.

The proposal by South East Water is another way in which Melbourne's government-owned water corporations are planning for a drier future.

Recent analysis by the water corporations found that, at worst, the city's demand for water could outstrip supply by 2028 and that on more moderate projections chronic water shortages will hit within 25 years.

Matt Mollett, a spokesman for South East Water, said its researchers were looking for ways to use less mains water in Fishermans Bend by making much better use of rainwater, stormwater and recycled sewage.

"Water trading is currently used for agricultural irrigation supplies, and enables under-utilised allocations to potentially be used for the benefit of other users, or the water network more broadly," Mr Mollett said.

"The rainwater micro-trading project seeks to explore whether or not these benefits could be transferred into a residential or urban context in the future."

The rainwater trading concept is unproven, and will only proceed if investigations find it is feasible.

Apartments would each be assigned a quota of free rainwater from the communal tank, which could be used or traded to other residents, leading to a reduced bill from South East Water.

The concept is complicated by the likelihood that rooftop tanks in Fishermans Bend will be drained ahead of forecast downpours, to reduce the risk of flooding from runoff.

The tanks will automatically respond to weather data from the Bureau of Meteorology.

Flooding at the York Street underpass in South Melbourne in 2015. Photo: Supplied

They will also feed water into a large water recycling plant to be built in Fishermans Bend, which will supply treated water for non-drinking uses.

It is expected mains water use in Fishermans Bend will be 45 per cent lower than in other built-up parts of Melbourne and 400 megalitres of rainwater will be reused each year.

Professor Tony Wong, chief executive officer of the Co-operative Research Centre for Water Sensitive Cities, said the benefit of rainwater trading would depend on how many apartments per building were using the same tank; a higher number of residents would reduce the available savings to be traded.

"Thinking of rainwater almost as if you are thinking of renewable energy and feeding into the grid is certainly a new concept," Professor Wong said.

But he said the concept of using a market mechanism to save water in high-density cities was worth exploring.

Fishermans Bend is a 490-hectare development zone planned to be built over the next 30 years into Australia's largest urban renewal area, with 80,000 residents and 60,000 jobs.