It was the unmistakable tones of the traditional gusle that first drew Radovan Karadzic into the Madhouse.

In his assumed identity as the bearded New Age healer Dragan Dabic, he became a regular at the little pub on the high-rise estate where he was soon giving virtuoso performances on the lute-like instrument, playing beneath a portrait of himself hung above the bar. One night he even played a folk song about “brother Radovan” hiding in his cave without betraying his real identity.

The performances were part of an extraordinary double life that included four fake grandchildren and a devoted woman companion.

The disguise was finally dropped yesterday when Dr Karadzic had a haircut and shave and announced that he would defend himself in The Hague, where he faces eleven charges of war crimes, including two of genocide. Although he plans to appeal against extradition tomorrow, sources at the tribunal expect him to arrive in the Netherlands early next week.

Serbia is in a frenzy of speculation about whether his fellow fugitive, the former General Ratko Mladic, will be arrested soon in response to a clear change of political direction from the two-week-old pro-EU Government that wants to put the country’s war-scarred past behind it.

Dr Karadzic spent the final year of his freedom living alone in an anonymous third-floor flat on an estate of dozens of identical multi-storey blocks in New Belgrade. He decorated the rented apartment with pictures of four fictional grandsons wearing LA Lakers T-shirts, to support his cover story of a family in the US, and was seen regularly at alternative health events with a mysterious brunette known only as Mila.

“She followed him to every lecture and behaved just like his wife,” said Tanja Jovanovic, who helped to organise some of the events. “We just knew her as Mila. If there was no space for her in the car , he would say that there was no way he would travel without her.”

Dr Karadzic’s wife Ljiljana and their children have been banned for several years from leaving Bosnia under measures meant to choke off his support network.

It became clear yesterday that Dr Karadzic had high-level help to evade justice for 13 years after the atrocities of the Balkans wars, when he led the Bosnian Serbs. He obtained a passport in 1998 in the name of a real person who died in 1993 and used it to travel at least twice to Russia for courses on alternative medicine.

In the Madhouse pub just around the corner from his flat, where he enjoyed Serbian red wine and plum brandy, the owner Tomas Kovijanic was proudly turning down cash offers for the gusle played by Dr Karadzic on raucous nights of nationalist folksinging. “How can I sell a Stradivarius?” Mr Kovijanic, 54, said.

“One night he was passing by the pub and he heard this gusle. He came in and stayed all night until sunrise. He drank sljivovica [plum brandy]. Then whenever he wanted to play gusle he came here.”

Mr Kovijanic said that “Dr Dabic” did not talk much about himself, except that he lived alone and was practising alternative medecine. Even though a photograph of Dr Karadzic adorns the bar, no one suspected the truth, the owner said.

“One night while they were playing gusles, he made a speech to the young people here. He said, ‘My children, listen to me. You are the future of Serbia. Please take good care of the gusle and keep alive the traditional epic poetry of our country, and make sure it gets communicated to the next generation. This is the only thing that can save Serbia’.”

Raso Vucinic, 26, a student politician who is a councillor for the nationalist Radical Party, said he could not believe that he had shared folksinging sessions with his hero.

“If I knew, I would have asked if I could have hidden him in my village in Montenegro,” Mr Vucinic said. “Everyone is sure that Radovan Karadzic is innocent and he was just defending the Serbian people. We live for the day when he is coming back to sit in this bar to drink red wine and play the Serbian gusle.”

One night, Mr Vucinic said, Dr Karadzic was playing the stringed instrument when someone suggested a modern folk song about the fugitive. He played along, accompanied by lyrics about “Brother Radovan” hiding in his cave, without giving away his real identity.

A woman in a nearby shop said: “He was always buying large quantities of low-fat yoghurt and lots of bottled water, as well as the daily newspaper. One day a little girl asked him if he was Santa Claus. He just smiled and patted her on the head.”

Jovana Vitas, 35, who lives in the flat opposite Dr Karadzic’s, said that he had moved in about a year ago. “He was always carrying a bundle — lots of newspapers and water bottles — and he was a bit clumsy, always dropping things,” said Ms Vitas, a teacher and writer. “He seemed nice and polite and compared to the rest of the people in the building he seemed more educated.”

Rumours were rife yesterday about how Dr Karadzic finally came to be captured on the No 73 bus, with one suggestion that the key information came from Mr Mladic, who is still at large. Serb security sources dismissed the theory that the arrest was part of a deal to allow Mr Mladic to remain on the run until The Hague tribunal was wound up in 2010 or 2011.

Dr Karadzic’s decision to defend himself raised the spectre of a drawn-out trial resembling that of his mentor, the late Serbian President Slobodan Milosevic, who died in his cell in 2006 before a verdict could be reached.

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