I have a city builder game in progress, and I'm adding the ability to alter buildings by directly interacting with them, as opposed to simply selecting an upgrade from a list. I.e. You click on a part of a building, and can visually see options of how to improve it.

Can anyone think of examples of games that already have this feature?

Minecraft is SORT-OF an example of this, but I think is a little too generic.

Starcraft, when adding a building add-on is also an example, how you atleast see a visual indicator of what is going to happen, at least as an icon.

Ive been looking at this kind of game (using a Bioshock MMORPG as a test example)

It has building mods of 4 types :

1) a program-generated landscape (its an underwater city so the structures have to be there first for the players to 'improve') That would have interchangable sections but with a seed map to guide the gross detail so the cityscape would be cohesive (the design allows it to be expandable as players explore it over long time). Those are 'gross' structural sections inside which different sections of walls and subunits of many variations can fit. Standard adapters for utilities and transport paths (and windows and portals piercing structural walls) would be part of the 'building blocks'. This main structure is largely static (but could have catastrophic damage so would be defined as sections to allow piecemeal 'damage' changes)

2) Interior spaces defined using groupings of walls/door/floors/stairs 'shapes' to create volumes (fit into standardized chunks matching the structure adapters with a finer level of detail (defines floor paths and ceiling heights as multiple levels can exist with the gross volume) Utility systems follow the wall surfaces in standard patterns. Changes and damage to this could be done by player actions in the game (major changes)

3) Interior space details (and some exteriors like signs and such) are alot more flexible - decorative details with materials/shapes/patterns to line the wall/floor/ceiling surfaces and built-in imbedded furniture features (lights, partitions, etc).

4) Props to place within the define spaces (moveables, furniture) with their own active functions

NPCs on automatic would populate the City so thats a whole nurther aspect to get them to interact with all of the above

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A huge part of the idea would be players being able to create and submit assets of all of the above kinds (to take the $$$ load off the company to continually provide new content (and more beyond that with missions, NPC scenarios, etc..) Alot of the reactive/interactive behaviors for objects/props would have templates (attributes/properties and subdivisions for breakages etc.. to work withing the game mechanics and be effected by players/NPCs actions). Vetting process for submissions would have to be boilerplated and would be designed to have the players (again) do most of the work testing/commenting/rejecting/accepting the assets before final OK by company personel.

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Neverwinter Nights actually had a simple system like that - and several times they had content drops of player created assets (props and chunks of themed terrain) for players to use in their worlds on their servers (tools were clumsy and there would have to be ALOT of improvements for what I have in mind). That game allowed larger assemblies of entire world data sets were published to be reedited/mod'd by other players (not easy so many good ones where run verbatum). The game mechanics scripting was another thing in Neverwinter Night where things like the NPC combat code submissions (and published by the company) were far superior to what the company had put out.

My Mission design and NPC behavior scripting would be much more complicated to allow them to interact with the terrain and props and players and each other. That is alot more work beyond just having the playing players do all the active actions/interactions to cause changes to the terrain (and the usual dumb as doornobs NPCs fitting within it)

My MMORPG ideas have a extent well beyond anything yet done. The list of the features goes way beyond the above (even more complex world and player creations) but thats beyond the scope of this.

Unfortunately its so vast and risky that none of the companies are ever likely to do anything like it for long long time Easy to use tools in particular are a bigger project than the game itself, but if done properly COULD be reused across many games and if the assets are sufficiently modular so could they be. (more efficient company internal asset work for multiple solo games might get a company to shell out).

Oh and I forgot the modular house system Ultima Online had at least 10 years ago. Houses made of building blocs of various shapes/function (built up by the player interactively) within which the free placeable objects could be put which went back another 5 years.