In a stunning setback for President George W Bush [Images] and his Republican party, Democrats took control of both houses of Congress on Thursday as the tight race for a Senate seat in Virginia went in their favour.

The Democrats took the seat they needed to capture the Senate when Republican incumbent in Virginia George Allen conceded to his Democratic challenger Jim Webb.

Allen was ahead by 16 points in July and the Democrats did not even consider Webb a viable challenger, until Allen called an Indian-American, Shekar Sidarth, a volunteer in the Webb campaign, a 'macaca', considered a racial slur.

Ever since, Allen's lead plummeted amidst charges of a past racist record. After his 'macaca' remark, Allen was constantly on the defensive, refuting charges that he was a racist and following an interview with rediff.com, where he promised to apologise to Sidarth, did so the next day.

He also continued to reassure the Indian-American community that he be judged by his track record of being consistently pro-India and pro-Indian-American, in terms of his strong support for the US-India nuclear deal and his advocating the expansion of the H-1B visa program, the majority of the recipients being Indian high tech workers.

Within moments of Allen's anouncement of conceding his seat, Democrats gathered outside the Capitol to celebrate their victory.

"The election's over. It's time for a change," Senator Harry Reid of Nevada said, who will be the new majority leader.