Reports said that at least eight boulders - each estimated to weigh about 70 tonnes - fell from the towering cliffs overlooking the district at about 0900 local time (0700 GMT).
"It was horror," said Hassan Ibrahim Hassan, 80, whose house escaped the destruction.
"The power went out, we heard a loud bang like an earthquake and I thought this house had collapsed. I went out, I saw the whole mountain had collapsed."
Witnesses described seeing hundreds of distraught people gathered around the site of the destruction, saying they had relatives and friends trapped under the rubble.
Some were scrabbling at the rocks with their bare hands.
The remains of the town have been covered by a thick layer of dust.
Rescue teams were forced to wait for the arrival of cranes and heavy lifting equipment to allow them to move the huge rocks, but as night fell the help had not arrived.
"I couldn't find my house this morning," said Mustafa Abdel-Fatah. "I could only see rocks on top of everything."
It was not clear what had triggered the rockfall but residents of the area were blaming construction work on the hill for causing the disaster.
A BBC correspondent says there have been previous landslides in the area.
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