Some 700 buildings have developed cracks in Joshimath.
Cranes brought down generator sets as disaster response teams in yellow hard hats began dismantling two multi-storey hotels deemed unsafe because of shifting soil in Uttarakhand's Joshimath on Thursday.
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It will take up to seven days to take apart the seven-storied Malari Inn and the five-storied Mount View hotels which stand leaning in the danger zone, posing a threat to more than a dozen houses, officials said.
The demolitions resumed following a revised compensation deal for residents after more than a hundred protesters in the town of around 20,000 people stopped the work, saying they were not being paid enough compensation.
Uttarakhand Chief Minister Pushkar Singh Dhami, who visited Joshimath and held meetings with locals and experts on Thursday, said a committee will decide the rate for compensation to be paid to the affected families, keeping in mind the interests of stakeholders.
"For now, Rs 1.5 lakh will be given to each affected family starting this evening. This is only a temporary measure. We are still working on compensation rates. Only 25 per cent of buildings in Joshimath are affected," Mr Dhami told NDTV.
"The winter games in Auli are beginning in February and the Char Dham Yatra in a few months. Sending a message outside Joshimath that the entire town is sinking is wrong. It will adversely impact the local economy," the Chief Minister said.
More demolition will follow as over 700 buildings - nearly a fourth of the town's total - have developed cracks. Some are leaning precariously, spurring calls from residents and environmental campaigners for a halt to construction in the ecologically sensitive area.
At a rare news conference on Thursday, Army Chief Manoj Pande announced that it will relocate some troops from areas surrounding the sinking town located near the Line of Actual Control or LAC with China.
Union Home Minister Amit Shah on Thursday led a high-level meeting to review the situation with Union Ministers Nitin Gadkari, RK Singh, Bhupendra Yadav and Gajendra Singh Shekhawat and senior government officials at his home.
The town of Joshimath is a gateway to Hindu and Sikh shrines as well as tourist hotspots like Auli. Thousands of people have been relocated since buildings in the town began developing cracks earlier this month.
For years, environmentalists and locals have warned about indiscriminate construction in sensitive towns like Joshimath. Ignoring many of these calls, the government has widened roads, and built dams and power plants besides allowing hotels and multi-storey buildings to mushroom.
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