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Prefabricated housing has been in existence for over a century, but their recent rise in popularity can be attributed to advancements in technology and sustainable practices. The main aim of this study is to develop a model that can satisfy Economically weaker section (EWS) and can be used for government program such as Pradhan Mantri Awas Yojana using eco-friendly and prefabricated materials which are suitable for Indian climate. Space optimization techniques, modular furniture’s and minimum functional space design concepts were used to design the housing unit and achieved compact carpet area compared to average space of these houses. Cost-effective materials such as Aerocon wall panels and Calcium Silicate wall panels, and Eco-friendly materials such as Expanded Polystyrene (EPS) panels were selected. By incorporating these materials, the cost analysis was carried out by collecting rates from suppliers and contractors. The comparison of the cost shows even through initial investment is more for the energy efficient material, it proves cheaper to lifecycle cost. By using the proposed design, it has been observed that using these materials can reduce construction cost, reduce energy consumption. This provides opportunities for the government to provide mass housing schemes and efficient houses, but it contains certain disadvantages such as high initial cost and thermal bridging or cracking of sandwich panels. Finally, as per the study it encourages further research focused on Implementation of Energy-Efficient systems and advancements in sustainable materials to further enhance the environmental performance and sustainability of Prefabricated houses.