Treatement of land for construction industry

treat it as asset if your planning to rent it or lease it. treat it as inventory, if your selling it back to customer base.

We have plan to sell it customers. But mistakenly we have treated as asset. Is it possible to convert it as inventory now.

Yes it is possible, derecognition is simple

Inventory a/c

To Fixed Asset a/c

Is there any capital gain attracted on this convertion if the same was taken place over few year leter. 

This falls under revenue recognition. No chance of capital gains arising. Remember, your selling land and development. Sales tax is applicable. Capital gains is for asset sale.