Almost 30 fire tenders reached on the spot to douse the flame.
"There is massive fire here, and from what I know is that cylinder blasts also have taken place in the slums," said a eye-witness.
Many slums are feared to be gutted in fire. No casualties have been reported so far.
"A call was received today around 6.44 pm about a fire that broke in the jhuggis located near tonga stand in Sadar Bazar.
"Thirty firetenders have been rushed to the spot and rescue operations are still on," an officer from Delhi Fire Services said, adding that 100 jhuggis are located in the area.
The cause of the fire is yet to be ascertained.
Further details are awaited.