"The new building of Taj Mahal Hotel has been totally flushed out, cleared and handed over to the Mumbai police," GOC-in-C Southern Command Lt General Noble Thamburaj told reporters.

He said security forces have been able to engage one of the terrorists holed up in the old building of the hotel.

"We are in the final stages of the operations. We will be able to wrap up things within a few hours," Thamburaj told reporters a little before noon outside Taj Mahal hotel as 35 hostages, including foreigners and a six month old infant, were successfully rescued from Oberoi-Trident. "It is just a matter of a few hours before we will be able to wrap up things."

The new building of Taj Mahal hotel has been totally sanitised and handed over to the police, he said, adding that one terrorist, possibly two, had moved into the adjacent old heritage building.

"We have heard the sound of a woman and a man, giving indications that they are being held hostage," Thamburaj said, but added that almost all guests and staff in the hotel have been evacuated.

He conceded that the there were some casualties among the NSG commandos but would not disclose their numbers and whether they were fatal or otherwise saying that operational details would affect the "mental makeup" of terrorists.

Thamburaj said operations had to be "deliberate and slow" to ensure the safety of the hostages, guests and hotel staff. The commandos had been told not to rush things under the "pressure of media or citizens".

He said some rooms in the hotel are still bolted from inside and people inside are not responding, probably they are scared. "As soon as communication and room services are restored, we will inform them about the situation and ask them to come out".

The General Officer Commanding in Chief of Pune-based Southern Command said the NSG has established contact with one terrorist in Taj Hotel.

While the new building complex of Taj Mahal hotel was cleared, the terrorists, who had moved to the heritage building, exploded some grenades in possibly their last hour battle.

Reports said that there are 3-4 terrorists holding an equal number of hostages.