At least 1,200 tin shacks were destroyed in the Chalantika slum late on Friday, officials said.
Many homes had plastic roofs, which helped the flames to spread. No deaths have been reported, although several people were injured.
Most residents are low-wage earners and many were away after the Muslim festival of Eid al-Adha.
There is no word on the cause of the fire.
The number of people made homeless by the fire is unclear, with Reuters news agency reporting it to be 3,000 people and AFP putting the number at 10,000.
