Merson said he could see Real launching a £200m ($280m) bid for Kane at the end of the season, exceeding the world-record £198m Paris Saint-Germain paid for Neymar last summer.
Kane, 24, is the top scorer in the Premier League this season with 23 goals in 26 games and is Tottenham's all-time leading scorer in the competition.
Defending Spanish and European champions Real are in fourth place in La Liga, 20 points adrift of leaders Barcelona. Among the concerns of coach Zinedine Zidane is the form of French striker Karim Benzema, who has only scored two goals in the league this season.
"I would be worried if I was Tottenham because money talks. £200m, or even £160m is a lot," Merson told Sky Sports.
"I can't see how Real Madrid don't go for him in the summer for £150-200m. How's Benzema playing for Real Madrid?
"He's not in the same class as Kane. They're a million points behind Barcelona and they need a new centre-forward."
Former Arsenal striker Charlie Nicholas added that Kane is in the same league as Barcelona superstar and five-time Ballon d'Or winner Lionel Messi.
"He could've scored three or four last weekend against Arsenal. We're starting to think about Harry Kane about is he up there with the Messis – and he probably is," Nicholas said.
"The mix of goals he gets as a number nine, is quite remarkable.
"There's a desire in him, he goes left, he goes right, he goes through the middle. He just loves scoring goals. He loves agitating people, without provoking the situation."
Tottenham chairman Daniel Levy said last month that he was "100 per cent confident" that the likes of Kane, Dele Alli and Toby Alderweireld would still be Spurs players next season.