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I have one requirement about preparing excel and word document based on SharePoint list data and download it for user in SharePoint Online using SPFX web part.

My question is: Can we create SPFx web part in which it creates a document using code and download it from web part? OR even is it possible with SPFx web part to create a document using coding?

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SPFx works using client-side JavaScript, meaning you can utilize any solutions out there that employ JavaScript.

For Word documents, you could use this tutorial explaining how to generate a Word document from some basic HTML, and download it using an a element.

For Excel documents, you could create a CSV file (a basic spreadsheet) using a similar method in this StackOverflow answer.

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