Balakot is not in Azad Kashmir
Not in Gilgit Baltistan

This is in Khyber Pakhtunkhwa

Just 64 kms from Abbottabad where Bin Laden was killed

This is in Pakistan proper!
Balakot was the site of a great battle in the year 1831, when the Sikh Army defeated Syed Ahmed Barelvi and other Mujahideens

Barelvi hailed from Rae Bareilly UP, and was an Islamic revivalist who took on the Sikh Empire
Barelvi can be viewed as the proto-Jihadist in some ways....

And Balakot is where he met his end while fighting the Sikhs.
Within Khyber Pakhtunkhwa, Balakot is located in the Mansehra district - which interestingly is named after Man Singh, the army general of Akbar.
The city with a population of 30K people was totally destroyed in 2005 when the Kashmir earthquake happened

Not sure how much of the city has been reconstructed
Here's what the historian Ayesha Jalal has to say about Balakot

In her book "Partisans of Allah" she says

"Balakot is in many ways the epicentre of jihad in South Asia"

"Blanketed by green, terraced fields and thick, dark forests, this beautiful town is situated about eighteen miles from the city of Mansehra in the North West Frontier Province (NWFP) of Pakistan."
"Situated on the banks of the river Kunhar, it serves as a gateway to the picturesque Kaghan Valley, which is bounded on the east and the south by Kashmir. It is also a point of entry into the history of jihad, struggle in the way of Allah, in the subcontinent"
Here's more -

"Balakot’s association with the idea and practice of jihad in South Asia was reinforced in the 1990s, when militant groups set up training camps in its environs to prepare for their campaign against the Indian security forces stationed in.. Kashmir."
"For these militants, Sayyid Ahmad and Shah Ismail are great heroes, whose jihad their admirers wish to emulate, to redress what they perceive as current injustices”
More here on Balakot and its important place in the history of Jihad…
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