Baghdad, 24 December 2004 - Iraqis who fled last month's US offensive on Fallujah began to trickle back into the city yesterday to check whether the homes they left were still standing. But most are staying away as a fresh round of violence claimed the lives of three US Marines in fighting near the city yesterday.

More than 200,000 people sought shelter in surrounding villages or tented camps near Baghdad before the attack which began on 8 November, and have yet to return.

Bilal Sami Sabri, a 29-year-old living in a tented camp with nearly 1,000 other Fallujans near Baghdad University, is not going anywhere. "What can we do? What are we going to do except stay here until the Americans and Iraqi National Guard have left the city. Once they're gone we'll go back and rebuild Fallujah with our hands."

US Marines in and around Fallujah said a steady flow of people were returning to their homes in the city's Andalus neighbourhood. Two thousand were allowed to return yesterday, though witnesses reported fighting and explosions in the southern districts.

Much of Fallujah has been destroyed. Months of bombing gave way to last month's full-scale US-led assault, aimed at dislodging insurgent groups which had taken control of the city and used it as a base to launch attacks on US forces.

The once bustling city of 300,000 lies in ruins, its water and electricity networks badly damaged. There is still no clean water, a Red Cross official said after a visit this week. "Most of [the water treatment plants] have been bombed or damaged because of the military operations," said Ahmed Rawi, of the Red Cross.

The Muslim Scholars Association, a hardline Islamist group, said the city was "uninhabitable" because of the bombing. "The rotten smell of the dead is widespread," said Sheikh Hareth Suliman al-Dari, a leader of the group.

The fighting was the heaviest in Fallujah since 10 December, when seven Marines, three Iraqi troops and about 50 insurgents were killed. The former insurgent stronghold has seen sporadic violence, including artillery fire, since it was captured in a week-long offensive last month.

F-18 fighter-bombers were seen striking at targets in the city's outskirts. Tank and artillery fire was also heard. At least three Marines were killed in the area, the US military said.

US forces, still on high alert after Tuesday's bomb attack on a base near Mosul in northern Iraq, are fingerprinting and photographing Fallujah men of fighting age as they return and scanning their retinas. Soldiers fear insurgents will sneak back and the fighting will resume.

The new Fallujah fighting came as the first group of returning residents lined up at checkpoints into the city, brandishing documents to prove to Iraqi policemen that they had the right to enter.

The interim Iraqi government has launched its election campaign by trumpeting a multimillion-dollar reconstruction programme in Fallujah, offering up to US$10,000 per family. Each family that returns will be offered $100 in cash before they enter the city.

Mr Sabri said nothing short of an end to the US presence in the city would entice him to go back. He was trapped in Fallujah until three weeks ago, witnessing the worst of the war. He was detained by soldiers who initially put him in a camp outside the city. He was later reunited with his wife and four children, who had left Fallujah just before the fighting began.

Over the past few weeks the residents in his camp have managed to make it liveable. Yesterday jovial children played under an exceptionally bright sun as women in abayas washed pots and pans while preparing a communal lunch. "Though we're living in tents, conditions are good so far," said Sadi Khalef, a 54-year-old Fallujah businessman who guided a small group of visitors around the camp. "We get three meals a day as well as food and shelter."

Khalef, a former resident of the Andalus neighbourhood, said he had no plans to return to Fallujah. "So far none of the families in this camp have gone back," he said.

But despite the danger and resentment, some refugees want to return to see what has become of their homes. "I want to enter Fallujah and I want to assess the damage to my house. I've heard that it was destroyed in military operations," Laith Nawwaf, 47, said. "If it has been destroyed, then I will ask for compensation from our government."