The Blancos assistant was hugely impressed by the Croat's performances at Euro 2012 and believes he would be an excellent addition to Jose Mourinho's squad
Los Blancos are currently trying to thrash out a deal with Tottenham Hotspur for Modric, but the English outfit are refusing to lower their £40 million (€51m) asking price for the Croatia international.
Karanka, speaking after Tuesday night's pre-season win over Real Oviedo, was reluctant to be drawn on the latest developments in the transfer saga, but did admit that Madrid would welcome the midfielder with open arms.
"Which club would not want to have a player like him? He is a player that stood out in the Euros," the assistant coach enthused. "It is clear that he would fit in at Real Madrid."
Karanka also effectively conceded that should Modric arrive in the Spanish capital, Kaka is likely to be moved on.
"Kaka and the club are working to find a good solution for all parties," the former Madrid defender explained. "But Ricardo is [still] our player and a model of professionalism."
Madrid defeated Oviedo 5-1 in their opening pre-season outing, with Angel Di Maria netting twice for Jose Mourinho's men.