interest on borrowed capital on short term capital gains

Hello  - I had booked a house in 2003, got posession in end of 2006. The house was registered in Q1,2007. I sold the house in April 2009. There was a mortgage on the house.

Q1) Will this be Long Term Capital Gain or Short Term Capital Gain on it?

Q2) How will the interest on borrowed capital be treated in the year of sale? Here Iam referring to the interest which was paid from 2003 -2006..can it be set off against the sale proceeds? As per the Income Tax act, If I had continued with the house I would have spread it over 5 years and set off against the house property income..What happens now? Can this interest be adjusted against capital gains(Iam assuming it will be Short term capital gians) Please advise.

Thanks

Umang