Sustainability assessment tools have been widely used in the building sector to evaluate the performance of buildings. However, they do not account for the dynamic internal and external building changes that occur with time. Furthermore, these tools adopt a discrete approach by ignoring the trade-offs among the pillars of sustainability. Hence, sustainability assessment should progress toward defining the building’s performance against achievable or predefined sustainability targets. This process, commonly known as benchmarking, has found limited applications in the building sector due to the lack of standard methods and internationally comparable data inventory. The systems thinking approach is ideal for handling these challenges associated with building sustainability evaluation and benchmarking owing to its potential to handle different subcomponents and their dynamic interdependencies. Further, benchmarking requires large data sets and involves significant testing and experimenting with numerous scenarios. Hence, a viable solution is to model and simulate the building’s sustainability while integrating various scenario interventions to define standard benchmarks. Therefore, this study proposes a novel sustainability assessment and benchmarking (SAB) framework for the building sector using system dynamics (a branch of systems thinking) modeling and simulation approach along with multicriteria decision making (MCDM) methods. The SAB framework is demonstrated using the case of the affordable housing segment in India, for which a sustainability benchmarking scale is developed. The main findings of the case study show that renewable energy interventions above 80% are an efficient way to improve a building’s sustainability to the best performance levels. Additionally, the net-zero energy policy is not the only way to reach the highest level of sustainability because a combination of material, water, and energy interventions could also lead to improved sustainability performance. Builders, government agencies, and urban planners worldwide can adopt the SAB framework to define benchmarks and implement policies for improving the sustainability of buildings.