At least 12 people, mostly labourers, are still believed to be trapped under the debris, and authorities believe their chances of survival are bleak.
The decision to demolish the adjoining building was taken late Monday at a meeting of engineers and state administration officials which was chaired by Chief Minister Manohar Parrikar.
"The building has developed cracks and has tilted by a metre at least and is a risk to workers engaged in the rescue efforts at the crash site," an official who attended the meeting said.
The official said the demolition process could be started Tuesday or the following day after examination of the damaged building.
Police also arrested Deputy Town Planner Prakash Bandodkar, who cleared the project. Superintendent of Police Shekhar Prabhudessai said other accused were untraceable.
"We are on the lookout for the others," Prabhudessai said.
The promoters of the real estate company which built the ill-fated Ruby Residence - Parkash Birring, Jaideep Sehgal and Vishwas Dessai - are missing, and Dessai has applied for anticipatory bail at a court. Ajay Desai, a municipal engineer, who is also responsible for clearing the project, is missing.