Tottenham star Alli has been one of the top performers in the Premier League this season.
The England international, 20, has caught the eye of Spanish giants Real since breaking into the Spurs first team two years ago.
And Clement, who worked under Carlo Ancelotti in Madrid before heading back to England, believes Alli would justify a move to the Spanish capital.
Paul Clement (left) says Spurs' Dele Alli would fit in at Real Madrid
“Why can’t he make the step up? He’s still so young,” Clement, whose Swansea side face Spurs tomorrow night, said.
“All the best players get linked with Real Madrid, Eden Hazard is another one who is being linked at the moment.
“But if these teams want to do well and challenge for trophies, they’ve got to try and keep their best players.”
Dele Alli's Europa League red card tackle in pictures
Thu, February 23, 2017Click through the gallery for the best snaps of Dele Alli's horror tackle for Tottenham against Gent
Click for the first pictures of Dele Alli's horror tackle in the Europa League
Spurs sold Gareth Bale to Real in 2013 in a then-world record £85million deal.
Real are seeking to break the transfer record yet again and have Chelsea’s £100m-rated Eden Hazard in their sights.
And Clement admits the lure of the Bernabeu is great.
“Like any player, the more consistent you are, and you’re challenging at the top, then you’re going to be of interest to arguably bigger clubs,” he said.