North Delhi Municipal Corporation has also suspended three engineers of the area and has asked the police to lodge an FIR against the owner and contractor of the building.
Besides the compensation for the deceased, those who have sustained serious injuries in the incident will be given Rs 50,000 each while Rs 10,000 each will be given to those with minor injuries.
"NDMC have already directed local police to lodge FIR against the owner and the contractor of the building. NDMC have also placed under suspension the Executive Engineer (Building), Assistant Engineer and Junior Engineer of the area," Divisional Commissioner Dharam Pal said.
Pal said that owner of the building was trying to construct second floor "unauthorisedly" and it collapsed due to use of poor construction material.
"In the entire operation, three dead bodies have been recovered and twelve injured persons have been retrieved from the debris. All injured persons have been shifted to Hindu Rao and nearby other hospitals," he said.
According to the police, three persons were killed and 12 others, including a woman, were injured in the incident.