Are you asking about the foundation? That's just dirt from the ground that's splashed up there.

Oh really? But I also saw water mark/stains when it was raining.

When it's raining, the splashes will be wet, thus the water marks. When it dries, it's just dirt that you can probably brush right off. Are you planning on some kind of material to cover the concrete and you're worried that moisture will be behind it, maybe?

Water drops splashing onto concrete is not a threat to the concrete, as long as the soil underneath drains well. Where you can get into real problems is if you have pooling water right at the area where the cement walls go deep into the ground. Over time this will weaken the concrete structure, and concrete will just absorb that excess water and spread it out through the concrete, putting large areas at risk of leaking as well as at risk of cracking.

So, the lessons there are to have drain spouts pointing away from the foundation in order to prevent the water from pooling against the side of the home. And also pay attention to pools of water near the foundation during rainstorms, and install good drainage there to prevent longstanding water exposure.

Looks like mud to me not water staining. We have red clay here and if you don't have mulch around the foundation you get mud stains on the foundation. Ive seen several homes around us with that kind of staining.

Plant a layer of 1"-2" diameter washed river rock 6" deep out from the house 6"past the eaves drip line. Have landscaping cloth under the rock and separate the lawn from the rock with metal edging.

From the looks of it, your builder did not use a plastic membrane or other waterproofing measures around the foundation.

Delta Membrane foundation wrap.

Besides proper grading and water re-direction, be prepared to re-grade the soil and rock adjacent to the foundation as it settles over time.

Moving water away from the foundation.

Rather than just using downspouts dumping water a few feet from the foundation, you can include underground drainage to spread the roof water throughout the yard and/or to a single outlet. Or hook up to municipal storm drains if that is still allowed in your municipality.

The builder just said he will apply some waterproof finish on there and then paint it.

Without exception, earth around the house is always graded to slope downward, away from the house. Optimally, this would extend for at least 10'. though that cannot always be had, depending on the configuration of the surroundings. This prevents any water from pooling near the foundation. Then, a layer of mulch blankets a strip of ground (at least 3' or 4' wide) surrounding the house perimeter. (This usually coincides with the foundation planting bed.) The mulch keeps the soil from splashing onto the foundation and staining it. Often, the stains cannot be completely removed, even with detergent and scrubbing. Consequently, many people paint the foundations and get the mulch in place before it happens again. The paint also adds a degree of water resistance to the foundation wall surface.

Also I am not sure what this does but the plan includes water infiltration system in the backyard. Not sure what that does but it is mandatory by code.

Wherever a house or other building is built, there is an area of land in which water no longer penetrates, on account of the added roof and paving that prevent it. Consider the amount of water that runs off of these surfaces during a hard rain and you'll see that it's considerable. Multiply this amount times every building in town, every driveway and every street and parking lot. The sum total of water that runs off of these structures can be enormous, and the city/governmental agency is, by default, responsible for dealing with it. Consequently there are all manner of storm sewer pipes, retention ponds, etc. built to handle this runoff. Many cities are trying to get as much of the water to penetrate/infiltrate the ground before it leaves the property of origin, in order to reduce the citywide sum of stormwater runoff. That's probably what the "water infiltration system" that is mandatory by code, is about.

Make sure to find out if your infiltration system is subject to periodic inspections by the county or city, and what needs done in terms of maintenance. We had a client who ignored theirs for 12 years and it was super expensive to bring it back into compliance.

"The builder just said he will apply some waterproof finish on there and then paint it."

That needed to be applied before the foundation was back-filled. Ground level only will not do anything much and in every jurisdiction I know of will not pass code inspection.

No that waterproofing epoxy was put in. He is talking about another finish All over.

That will do nothing nor will it doing anything to remedy poor site grading. But where exactly did he place this "waterproofing epoxy"?

I hired an outside expert who said above grading and topography survey looked OK. The epoxy is under the ground level.

It's hard to think of any foundation "waterproofing" that is invisible above grade before final grading. (Except for crystalline capillary waterproofing, which I did in the early 1990s.)

Adding gutters will reduce the splashing from roof runoff if you don’t have them, and it will help the structure by moving water away from the structure.

This is not a water stain it just a water splash into the concrete when it rain however any waterproofing materails highly recommended to cover this part of the building

Consider parging bare concrete foundations where they're visible.

Parged foundation. Image: Avenue Road Masonry

Thank you everyone for your helpful comments. We had a bit of rain yesterday and this is the water mark I am referring to. Builder is saying it is OK.

Interested to hear other experts’ opinions.