- What would be your use of having 4x4?
My basic use will be in city. Maybe I will go on long route on it, but needs proper testing on it first if I can travel on 90-100km speed for multiple hours. Not serious off-road stuff. It's like a trainer vehicle for me 
I will test it to nearby cities/areas, like Hyderabad, Mirpur Sakro etc. Before going on longer routes.
- You recommended to go for Pajero Mini to people looking for such 4x4. After knowing my usage do you think Pajero mini would suits my needs more than Potohar?
I'd recommend you to get a more recent model, 2010 - 2012 or Kix if going with Mitsubishi. Or go for Jimny 2008+ model. I think most of them are 660cc as well. These new models are really optimized for performance and power. See some off-roading videos on YouTube.
Or best would be to get Pajero 3 door. It's a diesel vehicle but it's a tad bit bigger and much comfortable for passengers sitting in back seats. It's almost same size as army's small LCs.
By the way my budget for SJ410 or Potohar is 450k to find a clean ride. Or even it can be lifted to 650k in case of some 90s jimny with coil suspension and F6A or K6A engine solving the two biggest problems of fuel economy and comfortable ride. But in case of stretching the budget I would have to wait for several months.
I also thought I'd get a clean Potohar in this range, but unfortunately it wasn't in range. People asking 600k for heavily rusted (roof + chassis) Potohar, because it was 2006 model. I was like wt*. It's too old design there's no security features, AC doesn't work as there no roof/body insulation, you've to step outside and turn a lock on front wheels to enable 4x4 locking. There was one showroom which had pretty clean one, he was asking 1mil for it... I'd pay 300k max for that one to be honest. Or better get Pajero Mini 2012/kix which is directly imported and not touched by local mechanics. Of course if I had 1mil budget 
So, in my budget I got local used vehicle. I'm happy with my purchase 
Also, about engine issues during travel. Well, anything can happen to any type of car. There can be tire bust, engine overheating, oil leak, breaks issues etc.
The key point is just maintain your vehicle, do oil change, engine belts change, breaks etc on time. And vehicle will not make any issues. Find a good mechanic you can trust on, and before travelling ask him for car's fitness and do the needed maintenance.
Best regards 
Pajero Mini 1995 M/T