It's called the Hanover Arts Project. With $6 million and a lot of luck, it may become the District's Soho -- a dense conglomeration of warehouses transformed into galleries and shops, restaurants, arcades and live-in studio space for 160 artists.

Away from the museums, the P Street Strip and Georgetown, the transformation of the neighborhood already has begun.

Hanover Street NW lies near the intersection of New York Avenue and North Capitol Street, between N and O Streets NW. Most of its old warehouses still look bleak and empty. But two of them now are filled with working artists, and the first commercial gallery -- Diane Brown's Sculpture Space -- has moved in.

Dealer Brown will continue to sell pictures from her gallery on P Street. The new space she has opened 20 blocks away will offer only sculpture. The 3,000 square foot loft with brick walls and wood floors is open by appointment. "My Sculpture Space," says Brown, "is more than three times as big as my gallery on P Street -- at less than half the cost."

Brown rents her third floor gallery from Eric Rudd, a painter and a sculptor who owns, and has rebuilt, the warehouse at 52 O St. Two years ago Rudd bought his 34,000-square-foot building. He was the first well known local artist to move into the neighborhood (for years he'd had a studio on Connecticut Avenue NW). Other art ists followed. Sculptor Yuri Schwebler, painters Ed Mayo and David Mayo and half a dozen others soon were renting studios there.

They liked the daylight, the loading dock, the 12 foot ceilings, the freight elevator and, of course, the modest rents. The word began to spread. Then a partnership -- of P Street dealer Ramon Osuna, art shipper Robert Lennon of Artransport and real-estate developer Jonathan Bowers of Intown Properties -- bought the smaller warehouse next to Rudd's and almost all the other buildings on the block. That property will become the Hanover project.

Their warehouse is divided into generously scaled but roughly finished lofts. Ten artists now rent their studio space there for $1 per square foot per year. Lennon says that tiny rent is "enough to pay the mortgage on the building." The lofts he intends to build and sell in the Hanover Arts Project will be more expensive, and range in size from 750 to 1,400 square feet.

They won't be finely finished; the walls will be raw brick, the floors raw concrete. "We're looking for people who have the stamina and ingenuity to design their own interiors," Lennon says. He expects to sell those two story studio lofts for between $40,000 and $80,000 each.

The architect for the project is David Schwartz of Architectural Services, whose scheme calls for a mix of renovation and new construction. Some of the loft buildings the partners plan to build will be five stories high. The walls that face the central open courtyard will be covered with white stucco; the walls on N and O streets faced with brick.

Lennon says that financing has not yet been arranged. "We may go to HUD for a mortgage. Artists don't have a lot of cash. I figure they should qualify for low income family funds. If the feds do not come through, we will try to raise the money from the banks. We're not moving anybody out of the neighborhood, we're moving people in." Lennon also is a partner in Gallery Row, a project designed to lure prosperous commercial galleries downtown to a set of renovated buildings on Seventh Street NW. He does not expect the Hanover Arts Project to be in operation before 1982.

Brown, whose gallery is filled with large wood and steel sculptures by Schwebler, Jennie Lea Knight, John McCarty, Raoul Hague, Michael Todd, Peter Reginato, Brower Hatcher and other artists, says she now earns more from selling sculpture than from paintings.

"Most local art is made in small apartments, or in two or three floor townhouses. I figure if you put a hundred artists into large industrial spaces and let them mingle with each other, the nature of their work is almost bound to change."

Sri Chinmoy, the Indian mystic who signs his pictures "C.K.G.," describes his modest abstract paintings, now on view in the lobby of the Hubert H. Humphrey Building, 200 Independence Ave., NW, as "fountain art." The name is apt.

Sri Chinmoy, whose centers here and in New York and 58 other cities offer instruction in meditation, is so hard-working that his art leaves his studio not in a trickle, but a flood.

He began his fountain paintings in 1974. Before the year was out, he says, he had painted 130,000 pictures. On Nov. 16, 1975, he claims to have produced 16,031 works of art. Only a few dozen of his friendly, colorful jottings are in this exhibition. Their number is sufficient; one does not wish for more.

Sometimes he takes a sponge, or perhaps some crumpled tissue, dips it in wet color, and then goes stamp, stamp, stamp! Sometimes, with a brush, he lays down marks that seem to conjure flowers, foliage, birds. His art is inoffensive. It is also thin. Sri Chinmoy is not a painter only. We are told that he has written 350 books and 3,000 songs. His exhibition closes at the end of the month.