Yunnan Province is located in the southwest of China, with complex geological conditions, including expansive soil, red clay, karst collapse, landslides and other adverse geological phenomena. The widely distributed red clay, due to its special engineering properties, is prone to cause foundation settlement and slope instability when the moisture content changes, posing a significant threat to the safety of construction projects. This paper experimentally determines the physical and mechanical properties of Yunnan red clay under different moisture content conditions in the laboratory, analyzes its relationship with foundation stability, and elaborates on its engineering hazards and their impact on the stability of building foundations and slopes, as well as the durability of structures. Based on the research results, this paper suggests adopting methods such as optimizing drainage systems, soil improvement, and reasonable foundation design to enhance the engineering applicability of red clay foundations and provide a scientific basis for construction projects in Yunnan. It also proposes targeted optimization measures, including foundation treatment techniques, slope protection, structural adaptability design, and monitoring and early warning systems, with the aim of providing references for the safe design and disaster prevention and control of buildings in this region.