Can you build abdominal muscle even in water?

Yes. Swimming will build abdominal strength and improve abdominal tone. Obviously not the best place to do ab exercises like crunches.
Yes. Just google "michael phelps" and "abs" and you'll see that it's possible. Building muscle takes resistance. When you swim, the water provides that resistance. If you're willing to settle for less than olympic abs (and don't have time for 6 hour workout sessions), join a local water aerobics or fitness group. Good luck!