Eight houses were gutted at Barion village of Kotkhai in Shimla district, nearly 65 km from here, on Thursday.
Confirming the incident, Kotkhai naib tehsildar said the inferno had "totally destroyed" eight stone and wood houses constructed in the traditional architectural style.
While no loss of life and livestock was reported, 25 families have been rendered homeless, and loss of property worth Rs 6 crore has been estimated.
As many as 19 families were provided Rs 20,000 each as compensation on the spot, the official added.
The cause of fire could not be ascertained, but it was said to have spread from a locked house after its inhabitants had left for Kotkhai early in the morning, he said.
The local villagers initially tried to douse the fire, and a fire tender each from Kotkhai and Shimla were rushed in to control the fire at around 10am, after a resident informed the police.
Chief of the adjoining Kiari panchayat Mohan Chauhan, who was helping the villagers, said the fire became more intense due to the wind, hampering the efforts of the villagers and firemen to bring the fire under control. The fire was still raging at 2pm.
Firefighting operations also suffered a setback when the tankers of the two water tenders ran out water, he disclosed.
To overcome the water crisis, Shimla divisional fire officer JC Sharma said another 9,000l douser had been sent at 11.56am.
Sarta added that while 50% of the fire had been brought under control by 1pm, strong winds prevented the fire from dying out till 4pm.
Meanwhile, villagers and relatives of the affected families have volunteered to make arrangements for their shelter and food.
Barion village is a thickly-populated area with nearly 40 closely-constructed houses.
On Tuesday, fire was reported in Gorton Castle and Lower Bazaar in Shimla.