He believed the 38-year-old man who fell out of the window was a visitor at the boarding home.
"There was a bit of a tussle but it's usually harmless," the man said.
He said it "wasn't a major party but it got out of hand".
The man who fell, was admitted to hospital with serious injuries.
The arrested man had lived in the boarding house for about six months, the man said.
"Whether it was deliberate or accidental, it's not clear yet."
A witness at the scene said a neighbour heard the altercation and went outside to see an ambulance at the scene.
He said there were currently "lots of shattered glass on the ground".
"Visually, it's quite interesting," he said.
He said there were about five police cars at the scene with about ten officers.
A cherry picker was also present to take photographs, he said.
Police are still investigating.
The 28-year-old man would appear at Dunedin District Court tomorrow.
