Based on the Tawau Municipal Council squatter unit's records, 35 were occupied by locals while the rest by Indonesians. The area has 47 squatter houses and nine were not affected.
No one was injured in the blaze which occurred at 3.40am, said Tawau Fire and Rescue Service chief of operations, Rudy Fredzex.
He said three trucks with 23 firemen and eight civil defence personnel as well as two utility vehicles were rushed to the scene and the fire was brought under control at about 5am.
"We had difficulty getting to the fire because of the narrow roads.
Besides, the electricity supply had not been disconnected and the water pressure was low," he said.
The cause of the fire and damage were under investigation, he said.
Tawau Welfare Department officer, Asnah Kassim, said the department had registered 31 heads of households, comprising 29 Malaysians and two foreigners, who were affected by the fire.