The ED had said that the total worth of the thirteen properties is Rs 1.22 crore and the people who held it allegedly worked for the terror outfit.
An official said that the three have been taken to the police station and incriminating materials recovered from them taken into records.
Asif Mustafa (30), who was working as an OGW for terror group Hizbul Mujahideen, was arrested during the operation and is being questioned.
Reports from the areas said the heavy firing exchanges were still continuing between the armed forces of both sides which started in the intervening night of October 19-20.
Naveed deserted the police force to join the terrorist ranks in 2017 and is currently the district commander of the outfit, the officials said.
The encounter broke out at Pazalpora area in Anantnag on a specific intelligence provided by the district police.
Acting on a credible information, police along with security forces arrested two terrorist identified as Chandi Khatana and Wajid Ali Khatana, both residents of Jandiwada Rajouri.
Police were looking for these terrorists since September last week after it received an input that they were hiding in Kashmir.
A document reveals a meeting was held at a location in Pulwama last week where three terror groups were briefed about the responsibilities assigned to them by their masters.
The officials said Mohammad Shafi and five others -- Masood Ahmad Mattoo, Mohammad Muzaffar Shah, Ghulam Mohammad, Tawseef Ahmad Gandna and Syed Ahmad -- were named in FIR.
A top Hizbul Mujahideen 'commander', Osama, and his two associates, Zahid and Farooq, were gunned down in the gunfight.
The top Hizbul militant was the brain behind several sensational incidents including the killings of senior BJP leader Anil Parihar.
BJP leader Anil Parihar and his brother Ajit Parihar were shot dead in Kishtwar town on November 1, 2018.
LeT tops the list with 112 militants followed by Hizbul Mujahideen with 100 militants, Jaish-e-Muhammad with 58 militants and Al Badr with three militants.
Meanwhile, terrorist group Hizbul Mujahideen has put up posters issuing a warning to locals in areas of South Kashmir.