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JAMMU, India, Aug 1 (AFP) - Indian troops were Thursday engaged in a firefight with suspected Islamic militants, more than 12 hours after the rebels barricaded themselves in houses next to a high security residential complex in Kashmir, police said.

"Two militants have been killed and one is believed to be holed up in a house," a police spokesman said, adding the exact number of rebels engaged in the fighting was not known.

"Until we search the area we can't say how many dead bodies there are," said another officer, Subash Rana, "It will take at least two hours for us to do that."

Indian army troops and crack commandos of Kashmir's police force, who were spearheading the operations, had blasted four houses in the complex using rocket launchers, in Rajouri town, 150 kilometres ( 90 miles) from Kashmir's winter capital Jammu, Rana said.

Civilian movement in the area had been restricted, he said.

The complex houses politicians, top police and administration officials and the Indian army's divisional headquarters for the border sectors of Poonch and Rajouri in Kashmir.

Militants entered the area late Wednesday after firing grenades at policemen guarding the area.

One army officer was killed in the encounter, Deputy Inspector General of Police S.S. Bajral told AFP.

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