<p>The construction industry, while a significant driver of economic growth, generates approximately 150 million tons of construction and demolition waste (CDW) annually in India, of which only 1% is recycled. This raises pressing questions about the state of CDW management not just in India, but also in other countries with similarly large or even larger construction industries. The study explores the integration of circular economy principles into CDW management within residential building projects, with a focus on enhancing recycling practices. This study critically analyzed current CDW management practices and eliminated inefficiencies through standard measures such as importance index to measure and prioritize waste and recycling issues. Using a structured six-step methodology, the research quantifies CDW generation and assesses the impact of waste reduction initiatives through lean principles, including the implementation of the 5S method at pilot sites. Key findings reveal a 10–20% reduction in CDW through systematic segregation and recycling, alongside an 8–15% improvement in cost-efficiency by utilizing recycled aggregates and manufactured sand. The study identifies metals as the most efficiently recycled material, followed by wood/timber, demonstrating the economic and environmental benefits of sustainable waste management. The study implies policy recommendations such as incentivizing recycling, establishing neighborhood storage facilities, and promoting green materials to drive broader adoption of waste management innovations within the construction sector.</p> Graphical abstract <p></p>