The real-estate rating project featuring participation by Izertis, selected for the Spanish Sandbox
The technological solution unveiled by Veltis Rating, the first European real-estate rating agency, with the support of financial institutions coordinated through CECA (specifically, CaixaBank, Kutxabank, Liberbank, Abanca, Unicaja Banco, Ibercaja and Caixa Ontinyent) and other enterprises, has been accepted to the open call of the Financial Sandbox. Veltis technology brings transparency from real-estate rating to one of the most opaque sectors such as real estate. A total of 67 initiatives were submitted to this first Sandbox call, of which 18 were selected, including the Veltis Rating initiative, which will be supervised by the Bank of Spain.
The Financial Sandbox is a test environment regulated by the Directorate General for the Treasury, where financial-sector companies can test disruptive ideas based on new technologies. The Fintech employers’ association AEFI asserts that this initiative will create 5,000 jobs and generate more than 1 billion euros of investment.
Veltis’ global technology solution, based on risk and real-estate rating, using Big Data, Business Intelligence, and Machine Learning, has been developed as part of the European Smart Government project, and has been recognised by prime entities and institutions as the most pioneering, innovative and value-added solution for its clients in Europe 2020.
Veltis Rating, promoted by Lanzadera, Juan Roig’s business accelerator, has submitted its candidacy to the Financial Sandbox with the support of the aforementioned CECA member entities, as well as our company, which will be the only company in the consortium covering the technological aspects of the project; the economic information centre Ceprede, linked to the Autonomous University of Madrid; and Refinitiv, a London Stock Exchange Group company that is one of the leading providers of financial market data and infrastructure in the world, with 400,000 users in 190 countries. Refinitiv provides Veltis with macroeconomic data and key indicators to generate real estate ratings.
Hence, our company will be in charge of performing the technological side of the project. This involves defining and managing an efficient, flexible and scalable infrastructure, able to handle the huge volumes of data used in modelling and ensuring demanding levels of up-time and performance.
The importance of rating in the real-estate sector
Within the prevailing regulatory framework, the real-estate sector is analysed exclusively from the value standpoint, which fails to furnish the necessary transparency. Using its technology, Veltis is able to add another fundamental piece of data: the rating. The appraisal determines the value of an asset on the appraisal date, while the rating determines the likelihood of a real-estate asset not generating a specific return associated with its level of risk on a specific date. This piece of data is what a bank needs to find out the loan performance evolution on that date.
able to invest or to extend a loan with confidence and with a very significant increase in guarantees for operators and investors, we need to know both variables, something that does not currently happen in the real-estate sector because only the value is known. It has been proven that the current real-estate risk control system is ineffective, as its shortcomings have caused the ruin of many banks and operators in the sector in several crises”, comments Ricardo Antuña, CEO & Founder of Veltis Rating.
For this reason, we need a regulatory framework (comprising regulatory bodies, members of the banking sector and experts in real-estate risks such as Veltis) that recognises the need to operate with real-estate ratings as an essential aspect of any financial deal linked to the real-estate sector, thus allowing a specialised rating far removed from that which can be provided by run-of-the-mill agencies in the financial world.
The opportunity to test this real estate rating operation and to describe the consequences for the implementation of a new regulatory framework through the Financial Sandbox is therefore ideal to satisfy the project’s goals.
The recognition of the real-estate rating as a supplementary tool to the appraisal and that manages to bring transparency to the sector will promote investment, the creation of wealth and jobs. This solution not only benefits the banking sector but also all citizens directly and indirectly” as it represents a very significant cost saving and a global tool for controlling the risk associated with the sector and its basic assets, concludes Ricardo Antuña.