I know I can add/remove grass in the World Editor, however I'm wondering if it is possible to do it at runtime (in game)?

For example, if a building is created on the terrain in the game, then I want to remove all the grass in the area under the building. If the building is later removed from the world, then I want to place grass again on the area where the building was.

Is this possible? To add/remove grass like regular objects, but still have the engine treat it as grass?

you can try use them as regular objects (OBJ_DEFAULT), but it won't be as fast as grass placed in WE as OBJ_GRASS