The four killed also included a local militant, an overground worker (OGW), and the house owner Altaf Ahmed, the IGP further said.
IGP Vijay added that the house owner was killed in a crossfire and the OGW had provided his rented space to the terrorists.
He also said that the exact location of the terrorists was unknown and the house where they were taking shelter had three rooms on the top floor. The house owner and Altaf and a second person Mudassir Gul, who was living on rent in the building, were called but unfortunately couldn't be saved, he added.
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"The door was knocked but militants did not open it. Then the door was again knocked, militants opened indiscriminate firing with a pistol. In self defence the search party resorted to firing. We stopped the encounter to rescue the two civilians but where they were standing it was difficult to rescue them," he said.
He said during the encounter two terrorists were killed. They were identified as Bilal Bhai code Haider, most probably a Pakistani terrorist, his acompolice from Ramban Banihal.
He said that the building owner, Altaf Ahmed, was killed in the crossfire.
"It is not sure whether the militant bullet or the bullets fired by forces hit him. Militants were carrying pistols and it would be clear after investigations whose bullet hit him," he said.
He said Altaf Ahmad Dar had given three rooms on rent on the top floor to Mudassir Gul, a contractor by profession who was running a fake call center.
"Lot of things have been recovered from the militant hideout in a room, including two pistols, three magazines, six mobile phones which were with the militants and four other mobiles from the hideout," IG said.
"A call center which has six cabins with six computers and six CPUs and several US maps besides other materials in the hideout were recovered like warm clothes, corex and injections which the terrorists used after getting injured."
He said Mudasir Ahmed, who was living on a rent in the building, had provided shelter to Haider and his associate.
"I want to share that the attack on Sunday in which a police personnel was attacked and took a bullet in the neck, the terrorist involved was brought by Mudassir in his vehicle to the hideout and kept there. Mudassir was running a terrorist module," he said.
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"The hideout was in the house of Altaf Ahmad, so we will count him as an OGW. He died in cross-firing, we could have saved him, but it was difficult since firing was going on between both sides. Mudasir was a top ranking OGW."