Shishir Baijal, chairman and managing director of Knight Frank India, also said that higher interest rates would not help to create the environment needed to improve demand in the housing market, which constitutes the majority of the country’s real estate sector.

“It won’t be the fillip which is required for the housing sector to pick up. You’re already talking about a sector which has seen, perhaps, its longest downturn in recent memory,” Baijal told CNBC. “I just hope it’s 25 basis points and no further.”

The average home-buyer could feel the pinch from higher interest rates, experts say. The thinking is that as the RBI raises interest rates, the country’s lenders could also charge more interest on the money it lends to India’s borrowers, such as home-buyers. Existing borrowers may have to pay more for their existing loans.

That would impact buyers mostly in the mid-to-lower tier housing market since their home purchases are mostly financed through bank loans, according to Baijal. He explained that in recent months, demand for lower-priced residential properties showed a greater demand than luxury or premium housing. But even with nominal prices coming down, it did not ignite any substantial uptick in demand, he added.

However, some experts said the long-term impact of a possible rate hike could be limited even if consumer sentiment takes an immediate hit.

“Most of the home loans are floating in nature and come with 15-20 year tenure,” Anshuman Magazine, chairman for India and South East Asia at commercial real estate services and investment firm CBRE, told CNBC by email. “The rise and fall in interest rates gets balanced out during the loan life cycle.”

On the supply side, property developers are facing a liquidity crunch, according to Baijal from Knight Frank India.

Developers need to get clear signals there would be sufficient liquidity in the market either through the non-banking financial companies or the housing finance companies, he said. That’s because those developers, under the new real estate regulatory act, cannot afford delays in their projects, Baijal explained.

Developers with projects that are partially completed would also feel the pinch of higher interest rates, said Vivek Dahiya, the managing director for North India at Cushman & Wakefield, a real estate services company.

Overall, Baijal said, Knight Frank India expects another four to six quarters before the housing market makes a turnaround in demand.

Experts suggest that the stability of India’s financial institutions are a worry, coming to head especially in the last few weeks with the near-collapse of a non-bank lender called Infrastructure Leasing and Financial Services.