A proposal for a $38.5 million motel-office building complex in Southwest Washington moved closer to reality yesterday when a House subcommittee approved transfer of an obscure parcel of land for the urban renewal project.

To be called Federal Center Plaza, the 4.2-acre complex would include a 350-room Holiday Inn, two eight-story office buildings totaling 700,000 square feet in commercial and office space and a 1,000-car underground garage, according ot officials of the D.C. Department of Housing and Community Development. The proposal has received little public notice.

The project area, bounded roughly by 4th, 6th and C streets and Virginia Avenue SW, would generate at least $1 million a year in real estate and sales tax revenues, officials said.

In its action yesterday, the fiscal and government affairs subcommittee of the House District Committee voted approval of a bill transferring title to a 41,000-square foot land parcel in the project area from the federal government to the District of Columbia. The transfer, approval of which is expected later this summer by the full committee and the House, would complete consolidation of the 186,000-square foot urban renewal project area.

The Redevelopment Land Agency, the city's urban renewal authority, has tentatively selected 500 "C" Street Associates, a limited partnership including the Dunohoe Construction Co., the Donohoe Investment Co. and three private investors to build the complex.

A public hearing on the proposal has been scheduled by the city's housing and community development department for 2 p.m. on July 25 in the RLA board room at 1325 G St. NW.

Housing department director Lrenzo Jacobs told the House District subcommittee yesterday that if the 41,000-square foot land parcel transfer is approved, construction on the project could begin this fall.

The project, on the planning boards for several years, is seen by District Building officials as another manifestation of the new development boom that already has cropped up in such diverse sections of the city as West End and Friendship Heights.

Just this week, developers of Waterside Mall near the proposed Federal Center Plaza complex in Southwest Washington announced plans to build another 200,000 square feet of office and retail space.

Jerry Gregg, Federal Center Plaza project manager for Donohoe Construction Co., said yesterday the motel-office building complex should "net the city something in the vicinity of $1 million in real estate and sales taxes each year . . . and that figure is probably low."

Even though the land will be leased - not sold - by RLA, the developers will pay the real estate taxes on the land as well as a ground rent of $460,000 a year, according to Joyce Cappon, acting chief of the commercial branch in the city's housing department.

She said the ground floors of the two office buildings will have retail shops "with open plazas between the two buildings."

Gregg said the developers have "been talking" with potential tenants of the office buildings but would not specify who they are except to say they are from both the private sector and federal government.