The Sevilla man stated that his international colleague is one of the best players he has ever played with, and says he would have no problem fitting in at the Santiago Bernabeu
Los Blancos are currently in the process of trying to persuade Tottenham Hotspur to part company with their star playmaker, with the two clubs currently at loggerheads over the size of the transfer fee.
However, Rakitic believes that the Spanish champions should do whatever is necessary to sign his international colleague.
"As a player, he's good enough to play for any team, including Real Madrid," the Sevilla midfielder told MARCA. "He's one of the best I've ever played with.
"I'm convinced he has more than what it takes to play at the Santiago Bernabeu, although from what I've read and seen lately the situation is a little complicated.
"I hope things pan out the way he wants and if Real Madrid manage to sign Luka, I have no doubt it'll be a match made in heaven."
Indeed, Rakitic does not buy into the notion that Modric might not be industrious enough for Madrid coach Jose Mourinho.
"He can adapt perfectly well to what Mourinho asks of him because he's very hard-working and a really good lad," the former Schalke man argued.
"He likes talking to other people, he never has any problems with anyone and he speaks excellent English, so I'm convinced he'd adapt in no time."
There has been some debate over where Mourinho would deploy Modric, and Rakitic has now weighed in by arguing that he should be played alongside either Xabi Alonso or Sami Khedira.
"He can play anywhere along the midfield," the 24-year-old explained. "I think he's at his best when he plays in the holding role alongside someone else, but he can also acquit himself well as a No.8 or No.10. He's an extremely versatile footballer."
The 26-year-old Modric, who has been capped 57 times by his country, joined Spurs from Dinamo Zagreb in 2008.