Hi Anjana,
I've just found OpenRouteService and interested in the answer. I suspect the answer is that it uses a fixed speed. There is no input for time so at best it would be an average speed. Looking at some of the shapes I've created around London, it returns a pretty large area, which isn't realistic in normal traffic conditions. I can't see anyway to customise this, but would be interested to know more. I guess what you want is a calculation a layer deeper that applies speeds to different categories of the same road type, with a lower speed set to inner city roads for example.
As a work around, there is the option to select HGV (I am assuming from your question you're talking about cars), which creates a smaller catchment, presumably because the speed settings are lower. Not perfect, as it will probably just lower speed on major roads, which may not be applicable, depending on the area you are look at.
Please note - I've only just started using this service so have very limited knowledge. I'll be interested in any other replies.
Good luck, Steve