Capital gains tax and exemption u/s 54

Has he sold the property in 1998 or acquired the property?

On capital gains computation, cost of acquisition including cost of improvement is permissible deduction. If the period of holding is more than 2 years, you can claim the benefit of indexation. The gain so arrived at will be treated as long term capital gains and accordingly taxed at 20%. 

In absence of date of purchase of under construction flat, I cannot comment whether exemption under section 54 is available or not

Sorry, date of purchase is 30/12/1998.

Considering that the property is purchased in 1998, the gain will be long term capital gain. Accordingly, benefit of indexation should be available (presuming the seller is a resident). For claiming benefit of exemption under section 54, one need to analyse the reason for the property still being under consideration (esp considering that it is 5 years since the booking of the flat), status of construction, amount paid etc. it could be contentious to claim exemption under section 54 in the current set of facts. One will need to carry out detailed analysis of section 54

The property is still under construction because of delays on the part of the builder...the residents have filed case in RERA and have got the builder to restart the construction.