Reclaimed wood ,use pallets you could take apart and nail them up .Could be free if you look on Craig's list for free pallets

You can use any seasoned natural hard wood like teak , sal wood etc. Another alternative is acacia wood (cost effective)!

firstly complete wall putty inside, then flooring, door frames, at last paint

I Understand. That's a common concern with my clients. But if you choose to have a 3-inch false ceiling, it will not kill the height. you need a minimum of 3 inches for the electrical conduits to pass. And as for the unhygienic environment, it is only created if you have a tray ceiling for cove light. If you install a plain ceiling after a thorough cleaning, there will be no hygiene problem. I hope this helps you all the best