Thirty-year-old Ola Washahi and 47-year-old Suha Abu Saada were killed when the rocket slammed into the home, destroying it.

The two women's body parts were still being pulled from the rubble hours later, causing initial confusion over whether another person had been killed.

The facility's director, Jamila Alaywa, is unable to contain her fury as she describes the tragedy that has befallen the centre she set up in 1994.

"Both Ola and Suha had severe mental and physical handicaps, and had been living at the centre since it was founded."

The building in northern Gaza's Beit Lahiya housed 13 residents, including some who were on weekend visits at their family homes when the strike hit. Five residents and a helper were inside, screaming in terror as the building collapsed around them.

"They didn't understand what was happening and they were so frightened," Alaywa said. "They fired the rocket and it hit us without any warning. There was no warning strike with an empty rocket."

Israel has said it tried to minimise civilian casualties by firing a small missile at a target first, to give non-combatants a chance to leave.

"Ola and Suha's bodies were torn into pieces," Alaywa said. "We never imagined that something like this could happen. There is no one in the residence or anyone around us that belongs to the resistance."

The two women are among more than 165 people killed since Tuesday, when Israel launched a massive air and artillery assault aimed at halting rocket fire from militants in the Gaza Strip.

Hamas and other militant groups have fired hundreds of rockets into Israel, where there have been no fatalities.

Israeli Defence Minister Moshe Yaalon said his country should ready itself for several more days of fighting.

"We have accumulated achievements as far as the price Hamas is paying and we are continuing to destroy significant targets of it and other terror organisations," Yaalon said.

"We will continue to punish it until quiet and security returns to southern Israel and the rest of the country."

The central Gaza mosque was being used to conceal rockets like those militants had fired nearly 700 times towards Israel over the past five days, the military said. Israel has also demolished dozens of homes it says are used by Hamas for military purposes.

"Am I a terrorist? Do I make rockets and artillery?" asked Umm Omar, a woman in the southern town of Rafah whose home was destroyed in an air strike. It was not known why the building was targeted.

For now, the wounded residents of Alaywa's facility remain in hospital.

Sally and 28-year-old Ahmed al-Awar are in intensive care, being treated for serious burns.

Alaywa has made arrangements for the residents who were away to remain with their families for now, and is hoping to find places at another charity for her wounded charges.

Neil Young cancels Tel Aviv gig over fears of Hamas rockets

Safety fears have forced the cancellation of Canadian rocker Neil Young's impending concert in Tel Aviv, the target of repeated rocket fire from Gaza in the past week.

Concert promoter Shuki Weiss announced "with great sorrow" the cancellation of a show scheduled for Tel Aviv's riverside Yarkon Park on Thursday.

"This is due to the rocket attacks of recent days and the fear for the audience's safety in a mass event," he wrote on his Facebook page.

As in previous days, air-raid sirens sent Tel Aviv residents sprinting to bomb shelters yesterday, and Israel's Iron Dome defence system blew up incoming rockets in the skies above.

Police spokesman Micky Rosenfeld said that the concert was called off after consultation with civil defence authorities "in regard to large gatherings in central populated areas due to the security dangers involved".

Reports said over 40,000 tickets to the Young event had been sold. Young last played in Israel in 1993, appearing with Pearl Jam. He has resisted calls to boycott Israel and fans were looking forward to his return, this time with his band Crazy Horse.

The Haaretz newspaper said that other forthcoming visits in doubt were those of Paul Anka, on July 24 and 26, and the Backstreet Boys, scheduled to play three dates from July 29 to 31.

Agence France-Presse