1. In my opinion, the very first condition is the house property has to be bought by the individuals jointly, and this should be in their joint names (ownership is important). Since this is not the case here the husband (unless he is deemed owner) cannot get interest and principal deduction from paying the housing loan.
2. Regarding the question as to whether he can claim deduction u/s 54 from capital gains towards flat purchased in the name of the wife, there are some favorable cases. eg Shirish Vinayak Godbole Vs. ITO (ITAT Pune), ITA No. 1320/PN/2010 dated 13-02-2013. But the problem here is that no amount of capital gain was actually invested in purchase of the wife's flat.
Pl refer to the In the following case:
[Deputy Director of Income Tax (International Taxation) Versus Jennifer Bhide Dated: 26 September, 2011 :Neither section 54 nor section 54EC of the Act mandates that the purchase of the property or investment in bonds should be exclusively in the name of the assessee. Though the name of the assessee’s husband is shown in the sale deed as well as in the bonds, as the entire consideration for acquisition of the same is flown from the assessee, in law the assessee’s husband has no right.
Once the sale consideration is utilized for the purpose mentioned under sections 54 and 54EC, the assessee is entitled to the benefit of those provision.(Para 8)]
Case not in favour: Kerala High Court in the case of CIT v. V. R. Desai, 197 Taxman 52.
Conclusion: The issue is highly debatable and there are Conflicting decisions on the subject.