Construction cost in India is increasing at around 50 percent over the average inflation levels. It has registered an increase of up to 15 percent every year, primarily due to the cost of basic building materials such as steel, cement, bricks, timber, and other inputs as well as the cost of labor. As a result, the cost of construction using conventional building materials is becoming beyond the affordable limits, particularly for low-income groups of the population as well as a large cross-section of middle-income groups. Therefore, there is a need to adopt cost-effective construction methods either by up-gradation of traditional technologies using local resources or applying modern construction materials and techniques with efficient inputs leading to economic solutions. This has become the most relevant aspect in the context of the large volume of housing to be constructed in both rural and urban areas and the consideration of limitations in the availability of resources such as building materials and finance. In this study cost-effectiveness of various innovative materials with conventional materials is studied for a building by designing and cost estimation. The use of Expanded Polystyrene Wall panels and gypsum plastering has been included as cost-effective materials in place of laterite masonry and cement plastering.