LONDON, Jan 4 Reuters U.S. funds giant BlackRock will defer thirdquarter redemptions from its 3.5 billion pounds 4.2 billion BlackRock UK Property Fund, a source told Reuters, in the latest sign of strain in Britain39;s real estate market.

Top asset managers, including MG, Columbia Threadneedle, Schroders and CBRE Investment Management, have imposed restrictions on property fund redemptions since September, after money market turmoil and interest rate rises forced investors to pare exposure to the asset class.

BlackRock39;s UK property fund will defer withdrawals that were originally due to be paid at the end of December, a person familiar with the situation said, asking not to be named.

It had previously also deferred secondquarter redemptions, which were due to be paid out at the end of September. The fund had 3.5 billion pounds in assets under management as of October.

Openended real estate funds across Britain have been battling to meet a surge in demand for investor exits, against a backdrop of stubbornly high inflation and economic uncertainty.

Many British pension schemes cut their exposure to property to rebalance their portfolios after selling large volumes of more liquid assets in late September, when a package of unfunded tax cuts proposed by former Prime Minister Liz Truss sent UK government bonds into freefall.

According to CBRE39;s monthly UK commercial property index, capital values at the allproperty level dropped by 5.5 in November, extending its…