yes, it could work that way, though the present progressive is usually translated with stare+gerundio:
- cosa stai costruendo? - what are you building?
Is there a different word for what are you making? That would be significantly more common in English.
"what are you building" is also correct for a translation of the present tense
2nd person singular = construisci. Is costruisci a new replacement for the "tu" tense"?
Some -ire verbs, like finire and costruire, use the form (io) -isco, (tu) -isci, (lui/lei) -isce, and (loro) -iscono.
I think I've heard a term for old people in Italy who watch construction sites, forgot what it was, but this sentence is probably what they would be saying if a construction worker came near.