I have read in one hadeeth (prophetic narration) that if a man builds houses more than what is required then on the Day of Judgement he will have to carry those houses as a burden on his back. I would like to know that if one pays proper zakah on the extra houses then will he still have them as a burden on his back on the Day of Judgement?
We do not know of this hadeeth to which you refer. The one who it is proven will carry things on his back on the Day of Resurrection is the one who took things unlawfully from others in this world, whether by force or by stealth, or stealing booty from the battlefield before the spoils of war were distributed.
It was narrated that Abu Hurayrah (may Allah be pleased with him) said: The Prophet (peace and blessings of Allah be upon him) stood before us and spoke about war booty and how serious the matter is. He said,
“I should not like to see anyone amongst you on the Day of Resurrection, carrying on his neck a sheep that will be bleating, or carrying on his neck a horse that will be neighing, saying: ‘O Messenger of Allah! Help me!’ and I will reply, ‘I cannot do anything for you, for I have conveyed Allah's Message to you.’ Nor should I like to see a man carrying on his neck, a camel that will be grunting, saying: ‘O Messenger of Allah! Help me!’ and I will reply, ‘I cannot do anything for you, for I have conveyed Allah's Message to you.’ Or one carrying on his neck gold and silver, saying: ‘O Messenger of Allah! Help me!’ and I will reply, ‘I cannot do anything for you, for I have conveyed Allah's Message to you.’ Or one carrying clothes that will be fluttering, saying: ‘O Messenger of Allah! Help me!’ and I will reply, ‘I cannot do anything for you, for I have conveyed Allah's Message to you.’”
Narrated by al-Bukhari, 2908; Muslim, 1831
With regard to a Muslim building a house that is bigger than he and his family need, Ibn Hazm said:
(The scholars) are agreed that it is obligatory for a man to build that which will shelter him and his family from prying eyes and from cold, heat and rain, or to buy a house or dwelling that will cover him in the manner mentioned. And they agreed that it is permissible to seek to earn more money and build a more spacious house so long as this is done by halal (lawful) means and he fulfils all his duties towards Allah, but they differed as to whether this is makrooh (disliked) or not.”
Maratib al-Ijma’, p. 155
What the Muslim should do is not to go to excess in matters of this world, and to limit himself to what he needs, based on the general meaning of the verses which forbid extravagance, such as the verse in which Allah says (interpretation of the meaning):
“And those who, when they spend, are neither extravagant nor niggardly, but hold a medium (way) between those (extremes).”
Al-Tirmidhi (4283) narrated from Khabbab (may Allah be pleased with him) that the Messenger of Allah (peace and blessings of Allah be upon him) said: “A person will be rewarded for all his spending except what he spends on building.” Classed as saheeh (authentic) by al-Albani in Saheeh al-Tirmidhi. Also narrated by al-Bukhari (5672) from Khabbab (may Allah be pleased with him). Ibn Hajar said: This is understood as referring to what exceeds one’s requirements.
This is also indicated by the way the Prophet (peace and blessings of Allah be upon him) was: he rose above preoccupation with this world, and warned his ummah (followers) against indulging in worldly pleasures, as he said in the hadeeth: “By Allah, I do not fear poverty for you but I fear prosperity in this world as those who came before you became prosperous, and you start to compete with one another in worldly gains, as they did, then you will be destroyed as they were.”
Narrated by al-Bukhari, 3158; Muslim, 2961.
There is no zakah due on the houses that a Muslim builds for his family or children, even if their value rises. And houses that he builds to rent out are not subject to zakah themselves, rather zakah is due on the rent if it reaches the nisab (minimum amount which has to be possessed for zakah to be due) and one whole hijri year has passed. Houses that he builds in order to sell are subject to zakah, because they are a kind of trade goods, so after one year has passed he should calculate their value and pay zakah on them, one-quarter of one-tenth of the total value.
For more details on this issue and the evidence, see the answer to question no. 10823.
And Allah knows best.