Houses in villages that are traditionally built with locally available materials like wood, mud, and stones are nowadays being demolished and reconstructed. The current trend has been to adopt framed construction with reinforced cement concrete and red bricks as the main materials. This is going to have a significant environmental impact and needs to be addressed with critical observations. This study was conducted for a local village in Tripura state, India, where a new house for the economically weaker section was constructed using stabilized mud blocks and bamboo as a model house. The main objective was to investigate the environmental impact of the transformation of a traditional house constructed out of locally available materials versus masonry and concrete houses. The impact has been represented as the difference in the Carbon footprint of the two houses based on the LCA approach. It was found that the total carbon footprint of the house built with locally available bamboo and stabilized mud bricks having a built up area of 25 m2 was 9.599 tons, 11.736 tons, and 11.401 tons of CO2 eq lower in landfilling, waste treatment and circular economy, respectively, as compared to concrete and masonry houses, and it has the potential to reduce the life cycle impact of the production stage to be almost neutral.