The veteran Austria defender's deal expires in June and Real management have decided against offering him new terms, reports transfer expert Fabrizio Romano.
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Alaba would welcome talks over a new contract, but now appears set to move on this summer.
The 33, year-old joined Real from Bayern Munich in 2021 but has struggled with injuries over the past two years.
Calf problems have restricted Alaba to just four appearances this season and none since October.