Despite Kashmir's unresolved conflict, Natacha Butler continues the tradition of summer retreat to a wooden houseboat.

Srinagar's Dal Lake is glassy-smooth as we glide along in a wooden fishing boat, past homes on stilts and islands of bullrushes. The call to prayer is carried on the breeze. The snow-capped Himalayas rise around us, their reflection ruffled in our wake. Kashmir's summer capital is working its charm.

Lassa is paddling. All weathered face and twinkling eyes, he has been showing visitors the lake since he was a teenager, 45 years ago. ''You know what they call Kashmir?'' he asks in pitch-perfect English gleaned from tourists over the years. ''They call it 'paradise on Earth'.''

For decades it has been a paradise lost. India and Pakistan have fought two wars over the Muslim-majority state. It has been divided between the two - as Jammu and Kashmir - since 1947, and both nations claim the territory in full.

Twenty years ago separatist militants in Indian Kashmir began an insurgency. India says more than 45,000 people have died; human rights groups say the figure could be much higher. In 1995, six Western tourists were abducted in Pahalgam, 100 kilometres east of Srinagar, by the Islamist group, Al Faran: one escaped, one was killed and the others are presumed dead. That virtually ended international tourism in the region.

Despite a sharp drop-off in violence, widely attributed to a faltering peace process started by India and Pakistan in 2004, most Western governments, including Australia, advise travellers to avoid Kashmir. There is still sporadic unrest - a general strike and undeclared curfew were reported in Srinagar's old town last week - but foreign travellers are trickling back. This is good news for a region where 60 per cent of people rely on the tourism industry.

I'm in Srinagar with a friend to escape the scorching heat of my adopted city of New Delhi and to stay in one of Dal Lake's famous wooden houseboats. There are more than 1000 houseboats on the lake but the ones operated by Butt's Clermont are the pick of the bunch. Moored far away from the others, the five houseboats have two or three double bedrooms, a living room and bathroom, with spectacular views across the lake to the mountains from every room.

''You can stay in a hotel anywhere in the world but a houseboat in Kashmir, well, that is truly unique,'' says the endearingly eccentric owner Ghulam Butt, who had earlier welcomed us with a flamboyant sprinkling of petals.

It's hard to disagree. Stepping on to one of the intricately carved wooden houseboats is like entering an Aladdin's cave crammed with traditional wooden furniture, Kashmiri rugs and embroidered curtains. I'm not sure if it's the high-altitude air, at 1730 metres, but what could normally smack of kitsch looks genuinely tasteful here.

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