Does it require any license to use city name to be a club name in soccer game?

Probably yes if you work closely with IP attorney, otherwise you will likely foul this up and get in legal trouble. You can't use the image of Real Madrid or Atletico Madrid, such as name, colors, logos, photos, or other indicia.

To merely use the name of a city (no logos, no special fonts, just the mere name) as a prefix to a club name does not require any license. For example, if your team is called "Thundersharks", there is no special license needed to call them the Chattanooga Tigersharks, and put their stadium in Chattanooga in the game, etc., so long as it is a fictional team of course (meaning, you could not do this in San Francisco, where the SF Tigersharks are a real team). But, there's more to it than that. It's all specific to the particular design of your game, location, team name, etc. and is not necessarily intuitive. You should really consider retaining an attorney familiar with the games industry to help guide you through the process. Simply reading a document will not give you the familiarity with the law involved to make an informed decision as to your licensing needs; you need to retain an attorney for that. Best of luck.