Three other hostages found dead in Mumbai's Chabad House Nov. 27, 2008 JPost.com staff, Yaakov Lappin and AP , THE JERUSALEM POST

The Chabad-Lubavitch movement has confirmed that a New York rabbi and his wife are among the dead in the India terrorist attack.

A spokesman, Rabbi Zalman Schmotkin, said Rabbi Gavriel Noach Holtzberg and his wife, Rivka, have been killed in Mumbai. They ran the movement's local headquarters, which was one of 10 sites attacked.

The couple's toddler son, Moshe Holtzberg, was taken out of the center by an employee, and is now with his grandparents.

Speaking to Army Radio on Friday, a relative, Yitzhak Dovid Grossman, said there was "an eruption of emotion" when the grandparents met their grandson. But he said they soon resumed "worrying about what is happening with Rivki and her husband."

Foreign Minister Tzipi Livni said there is "no room for great optimism" about the fate of Israeli hostages inside a Jewish center in Mumbai.

Earlier, Israel's ZAKA rescue service said five hostages and two gunmen were killed inside the center. It did not identify the victims.

Livni did not confirm that report at a news conference Friday. But she said she could not be optimistic about the hostages' survival.

She said members of Israel's diplomatic mission to India had not entered the Chabad house building in Mumbai because explosives continued to go off after the siege was thought to be over.

Meanwhile however, Indian IBN TV reported that the operation at Nariman House, as the Chabad center is called, had come to its conclusion.

Sky News quoted Indian National Security Guards chief J.K. Dutt as saying two gunmen were also killed in the operation against Islamic terrorists that had holed themselves up inside the building.

It came after commandos blew a hole in the wall of the besieged building as they tried to box in the Islamic terrorists who were holding an unspecified number of hostages.

The massive explosion shook the Chabad center, blowing out windows in neighboring buildings, while gunfire and smaller explosions followed the blast.

Commandos had rappelled from helicopters to storm the center earlier Friday, two days after a chain of Islamic terrorist attacks across India's financial center left at least 143 people dead and the city in panic.

Israel's ambassador to India, Mark Sofer, said he believed there had been up to nine hostages inside. Sofer denied reports that Israeli commandos had taken part in the operation.

Haim Hoshen, the Foreign Ministry's Head of Asia and South Asia Department, told the Jerusalem Post that two to four Israelis were being held inside the building.

The Foreign Ministry said that a total of 17 Israelis were still unaccounted for in Mumbai.

Also Friday morning, two Israeli businessmen were freed together with the dozens of hostages rescued late Friday morning from Mumbai's Oberoi hotel.

Earlier, an El Al plane carrying some 300 Israelis arrived at Ben Gurion Airport from Mumbai.

One of the passengers described the atmosphere in the city to Army Radio.

"There was a feeling of fear, panic and naivety on the part of the Indians. They realized that they did not know how to take control of the situation. I found myself in a closed, dark room waiting, listening to CNN…waiting to know what to do next," he said.