Do not blame Real Madrid for not giving Kubo playing time, clubs like Real Madrid don't use most of their academy players. Real Madrid likes using already-made players, so they can be a threat to other clubs. And that is the footsteps Manchester City has taken, and they are becoming with it.
Kubo is good but he's still young and have more years to play football, Real Madrid loaned him out for the player to start developing experience and becoming a pro player on the pitch. Real Madrid are only in for the players, they don't settle for any lesser results, the main reason they're still standing top today is simply because they're not stepping below their performance, only triggering good transfers on balance players and not some random faded players, not players that have fallen out of prime.