In the field of structural health monitoring, vibration-based damage identification systems have drastically increased in popularity. Most of the studies have developed considering fixed-base models without considering the underlying soil effect. The scope of the present study is to develop a realistic scenario of soil-structure interaction (SSI) through a detailed numerical investigation incorporating the dynamic properties of soil along with the estimation of structural damage severity by established frequency response function (FRF)-based approaches. The study has been performed on a 9-storey moment resisting frame. Both single as well as multi-damage conditions in the intermediate storeys and ground storey have been studied with various soil conditions. Results showed that structural damage can be estimated with efficacy at the higher storeys; however, the SSI effect especially influences the dynamic responses at the lower storeys. Therefore, the damage severity approaches required further modifications by involving soil dynamic parameters to obtain precise estimation of damage intensity, especially in vulnerable soil conditions.