The 29-year-old has not always convinced at the Etihad Stadium, however, as part of a City backline regularly lacking the calming presence of injury-prone captain Vincent Kompany, and his representative Martin Sendoa told Radio Continental that Otamendi would be interested in a move back to La Liga.
Sendoa said: "Nico is happy at Manchester City. But who wouldn't like to play at Real Madrid? It's the biggest club in the world."
Sendoa also touted Otamendi as a possible replacement at the Santiago Bernabeu for Pepe, whose contract expires at the end of the season, adding: "Pepe is leaving Real Madrid and Otamendi fits the profile they are looking for.
"Jorge Mendes [Cristiano Ronaldo's agent] is managing Otamendi in Europe.
"Barcelona have also followed him since he was at Valencia."
Falcao struggled for form and fitness during disappointing loan spells in England with Manchester United and Chelsea but has regained his predatory instincts this season to play a key role in Monaco's Ligue 1 title challenge.
Otamendi told City's official website: "He is a top player and very skilful inside the box.
"As a defender, you always have to be cautious when you play against him. Returning to Monaco was good for him and he’s scored 22 goals in 27 games, so he’s found his form again."