The deceased were identified as Babloo Paswan (25), Kanwar Pal (50) and Ashok (25), police said.
Twelve others including a woman were also injured in the incident, which occurred in Gali Barna area of Sadar Bazar.
"Following the incident, the North Delhi Municipal Corporation Commissioner Praveen Gupta today suspended three officials from the civic body's Paharganj Zone -- Executive Engineer, Assistant Engineer and a Junior Enginner with immediate effect," NDMC Public Relations Officer Yogendra Singh Mann said.
"The entire construction work was unauthorised," he said.
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The Delhi Government, meanwhile, announced compensation of Rs 2 lakh each for those killed, Rs 50,000 for seriously injured and Rs 10,000 for those wil minor injuries.
According to the Delhi Fire Service officials, a call was received by them at around 12:55 PM after which five fire tenders were rushed to the spot.
They said three JCB excavating machines have been sent to the spot to remove the debris and rescue operations were on.
They have been admitted to the Sushruta Trauma Centre at Hindu Rao Hospital and Ram Manohar Lohia Hospital.
"One of the injured is stated to be critical," the police officer said.
He said construction work was going on there on the second and third floors.