Word is they increased their offer in the last couple days. Things could get interesting this week. Earlier rumors had Madrid not being willing/able to meet asking price and that they could possibly send a player back to Spurs to make up the difference. In that rumor, Sahin was the player that could have come to Tottenham, but I started seeing this past week that he could go on a loan deal to Arsenal instead.
Also, among non-English clubs, PSG is said to be willing to spend what the club is asking, but Modric does not want to go there.
Of course, since these are all Internet transfer rumors it's probably bullshit anyway.