The rationale being banged on about lately is that of a player they don't exactly need but who would be a great squad addition (not miles from many on here saying adding someone of his proven quality is more important than a Carrick backup, no matter how many other midfielders we have for the other CM role).
Essentially:
- Easier games: alongside Alonso, no Khedira who isn't convincing in his overall play.
- When Alonso is not available: better alternative than anything they have.
- When one of the wingers/inside forwards are out: better alternative than anything they have, particularly as they want rid of Kaká
So mostly along the lines of "if we get rid of Gago and Kaká, and consider Sahin as unproven (a bit like Clev/Ando), adding Modric to the squad has us sorted in multiple ways". Reasonable, but not 40M worth, which is where the 25M+player sounds more plausible.
One interesting thing:
Madrid fans think at 26 he is young and will pay back over many years, while we point out he will be 27 soon and won't pay over the odds for that age profile.