Thermal fluctuations, which occur in extreme climatic condition, increase the energy consumption of building. To solve the above issue, thermal insulation materials, which are used commonly in the current practice possess several practical limitations and issues such as reduction of net floor area, increase in dead weight of building, susceptibility to deterioration, and variation in thermal conductivity with changes in humidity and temperature. Hence, to address the above issues, this study mainly focuses to use low thermal conductive and high heat storage phase change material (PCM) in building. In order to get the maximum surface area of PCM, it is incorporated in cement mortar for non-structural applications in building. The micro-encapsulated phase change material (MPCM) used in the study has phase change temperature of 28°C, and latent energy of 183 kJ/kg. It is incorporated in mortar to replace some of the fine aggregate (5 and 10% by weight) to find its effects on mechanical and thermal properties. From the test results on mechanical behaviour, it is observed that incorporation of 10% MPCM by weight of fine aggregate reduced compressive strength by 70% and flexural strength by 61%. However, the achieved strength of MPCM incorporated mortar is sufficient for non-structural applications. Also, it was observed that 10% MPCM added to mortar decreased its thermal conductivity by 22%, increasing the material's thermal insulation. In addition, 10% MPCM incorporated mortar having 1 m2 surface area and 10 mm thick can store 246 kJ heat energy, which will further improve thermal comfort in building. Further, from thermal stability analysis of MPCM, it is observed that MPCM has no effect on thermal stability of mortar up to 250°C. Adding to above, the results of economic analysis are also found to be promising as the payback period of incorporated MPCM varies approximately from 4.54 to 7.56 years based on 100% to 60% utilization period in a year.