Investors in commercial property funds should have to wait six months to get their hands on cash.

The Financial Conduct Authority has proposed that a pause of up to 180 days following a request to redeem investments would help all investors to be treated equally and would remove the need for funds to hold large cash balances.

The £12.5bn industry has seen funds shut on three occasions in the past 12 months, while most open-ended funds are currently gated due to valuation difficulties during the pandemic.

The regulator said it wanted to tackle to the so-called liquidity mismatch problem of funds offering daily redemptions while investing in illiquid assets that could take months to sell.

One drawback might be that property funds could no longer be included in share Isas.