ICICI joint managing director Chanda Kochhar said her bank would wait and watch to assess the impact of the RBI's measures on market rates. "Markets tend to react conservatively when faced with such tightening policies from the central bank. So, it is not entirely surprising to find the interest rate structure of the banking system going through a dynamic review and adjusting to the evolving market realities," she said in a statement.

Echoing a similar sentiment, Bank of Baroda chairman and managing director M D Mallya said: "It is too early to comment on a rate hike but the pressure seems inevitable. We will have to analyse this soon before taking any decision."

Nahar group chairman Sukhraj Nahar said an increase in the cost of borrowing would in turn raise the cost of a real estate project. "The cost of borrowing goes up not only for builders but for all ancillary and input industries as well, leading to a higher price tag for the real estate product," Nahar said. He said the rate hikes would eventually hurt the balance sheets.

Sunil Malhotra, vice-president (finance) at real estate firm Omaxe Ltd, said the flow of money to the sector would be tighter than before. "Developers will now have to look towards other sources of funds, which could be on higher rates," he added. An analyst with a leading Mumbai-based brokering firm said: "Developers will now have to look to other sources of funds like foreign direct investments and so on."

Parsvnath Developers chairman Pradeep Jain said the cost of funds for the company's upcoming power projects would go up significantly. "This will in turn be passed on to the buyer," he said. Echoing a similar sentiment, Punjab National Bank chairman and managing director K C Chakrabarty said the pressure seems inevitable. "Bankers would pass on the burden to customers."

A 0.5 percent increase in home loan rates -- which appears most likely -- will increase the tenure of a Rs3m, 20-year loan by nearly three years. Real estate demand in major Indian cities has been hit this year as urban middle class buyers, fretting over a five-year high in property prices, have stayed away from investing in property as interest rates climbed rapidly.

"Demand has slackened 10-15 percent since the beginning of the year," Sarang Wadhawan, head of HDIL, India's third largest developer, said last week. However, a few real estate agents said the rate hike could cause a possible softening of property prices, even in markets such as Mumbai.

"Developers are sitting on unsold stocks of completed apartments. But potential buyers are sitting still in anticipation that prices will come down," said a real estate agent in Mumbai.