The Spanish club will host the Turkish side in the first leg of their quarter-final tie at the Santiago Bernabeu on Wednesday.
"Madrid are the favourites, no doubt," Football Espana quotes him as saying.
"They are in a good run of form, are very strong and will fight to win the Champions League.
"They are hard and a fast team, very strong, but also creative. They are disciplined, organised and have a winning mentality in every minute."
Hagi played for both Madrid and Galatasaray during his career.