I think they mean 5 rooms, not 5 bedrooms.....one master bedroom and 2 bedrooms for children with twin beds or bunk beds in each. I lived in a 1,300 sq ft house for 2 yrs with my husband and 2 sons. My suggestion would be to have an open floor plan for the kitchen, dining area and family room in one large room. Add a bar in the kitchen for casual dining. Be sure to include storage in family room for toys, games, etc. Add a built in desk in eiher the kitchen or family room areas . The master bedroom and bath should be large enough to accomodate a queen size bed and if possible a sitting area (maybe a bay window large enough for for a small loveseat or a couple of comfortable chairs). I would recommend a large walkin shower but no tub for the master bath. Instead have a nice size tub/ shower combo in the hall bath. Too make your house feel larger, use neutral camel, beige, gold or grey paint and carpet through out the kitchen, dining area, family, hallways and hallbath. If you want to add color, limit it to 3 bedrooms. Hanging all your window treatments at ceiling height will make your rooms feel larger and taller.

Hi Option 1 As suggested by Cornerstone above. This way the TV will be visible from dining too Option 2 Move TV to the corner of the entrance wall, next to the window, placed at 45 degree angle. The L shaped sofa can then go to the diagonally opposite corner. The wall can be a see through book shelf/crockery shelf. This is better as the visitors have some inviting empty space as soon as they walk in instead of a sofa. Option 3 TV in current position, but instead of the TV being mounted on wall, perhaps have an open shelf (like below)

You can go for stone veneer sheets

There is nothing special about Kerala climatic conditions that require anything special (yes, I have several years experience with kitchen cabinets there). You can use BS 710 or 303 plywood with laminate on them with excellent results. Several interior firms also use HDF/MDF with laminate without much complaints from their clients.