The nuclear-armed neighbours have fought two wars over the disputed region, which they both claim in full while ruling in part, and skirmishes between troops stationed along the de facto border have made Kashmir the frontline of their discord.

But a sharp decline in militancy and a ceasefire that largely held for four years sparked a tourism boom, sending more than 3 million travellers to the Indian side of Kashmir last year while nearly 1.5 million vacationed on the Pakistan side.

The influx had been touted as a major success story for the government of Indian Prime Minister Narendra Modi, whose revocation of Kashmir's autonomous status in 2019 led to massive unrest.

Hotels, houseboats and taxis were nearly fully booked at the start of the peak summer season this year too, before the attack last month on tourists killed 26 men in a meadow.

India has blamed Pakistan for the attack and announced a series of diplomatic and economic steps against the neighbour. Pakistan has denied any role, unveiled tit-for-tat measures, and warned of an imminent military strike by India.

Yaseen Tuman, who runs a more than 100-year-old travel agency and operates multiple houseboats in Srinagar, the main city of Indian Kashmir, said that nearly all his customers had cancelled bookings and his houseboats were empty.

"Our houseboats were packed and now we have no guests," Tuman told Reuters, sitting on a wooden sofa in one of the houseboats on Nigeen Lake.

Indian travel booking websites show houseboats and hotels offering heavy discounts, but Tuman said he won't cut rates because he did not expect tourists to come in big numbers anyway.

"We will have to prepare for a long lull."