The House on the Water (Khaneye rooye ab), a new theatre piece by director Hamid Pourazari at the Andisheh Cultural Centre, is the current talk of Tehran.

One recent evening, the show started a little late. The City Festival, organised by the municipal office, was staging a small contemporary craft fair in nearby Andisheh Park. Young designers displayed their handmade items, including jewelry and bags, alongside stalls serving traditional foods. The weather had finally cooled down after a heat wave. The atmosphere around the capital was calm and relaxed.

It is always striking, the contrast between what is reported in many western media outlets, with their Manichean vision of a diabolic Iran, and the truth inside the country. This is not to ignore the difficulties Iranians face from soaring inflation and the varied effects of severe international sanctions, not to mention the regime. But it is impossible to deny the presence of an educated and curious youth, who strolled in the park with carefree elegance that evening.

I shifted my gaze to the theatre-goers waiting in front of the cultural center. A group of young people caught my eye. The women, who wore colourful veils, were discussing the current political situation with their partners and friends. It seemed that they all lived in Iran and worked in the arts.

One young woman was saying that the cultural periodicals she writes for are publishing too many articles, that readers are being overwhelmed by too much information. The theatre scene is booming, she said. There have never been so many shows, and the number of theatre groups continues to grow. "We could count the number of theatre pieces on the fingers of two hands a few years ago," she declared, "but now it's impossible to keep track because so much is done outside official programmes. The [situation] is becoming even more remarkable as private patrons invest."

I knew she was right. The Iranian public is so passionate about theatre that, several years ago, a crowd broke down the doors of the City Theatre in hopes of watching a sold-out show.

The conversation continued, revolving around censorship and the incoming government. It was obvious that renewed hope was rising from the ashes. But at the same time, the young people remained skeptical, uncertain about what really awaited them.

A director spoke of how he had to deal with government censors because of the phrase "two-pin electric plug" in a certain script. The phrase was struck out on the grounds that it had erotic connotations. Everyone giggled at the thought of what exactly those might be.

Another told of the censors who attended a dance-theatre piece performed by two men. They asked one to avoid bending forward too far, as he was drawing excessive attention to his posterior. The group analyzed how this too could be regarded as erotic. Given that two men were on stage, would the performer's position have suggested something homosexual? Everyone laughed again.

Finally, one of the woman said, "We're going to be pushed to present an empty stage – but even then they're sure to find something to pick at."

The discussion shifted to the implementation of new censorship strategies, described by the new, and supposedly moderate, minister of culture and Islamic guidance, Ali Jannati, who has proposed an end to pre-release censorship. If his plan is accepted, censors would step in only after a book's publication or a performance's debut. Would this be better? Would it give Iranians more freedom?

One man, apparently an actor, argued that it would be a dangerous step: "They're going to let us publish or present anything we want on stage, and then forbid it right after. This proposition is useless, and might make things even worse than before." The theatre critic agreed, adding that publishing houses risked great financial loss if they brought books all the way to publication only to see them banned. Another member of the group, full of optimism, was convinced that the proposal signified a new freedom and that they should be celebrating.

The debate came to abrupt end when the beginning of the performance was announced: the audience was invited to enter the building, through which the piece would lead them. Pourazari is known for his unorthodox approach to theatrical presentation. For his 2011 interpretation of Bertolt Brecht's The Caucasian Chalk Circle, he enlisted 85 Afghan refugees; a year earlier, he staged an original work, U Turn, in a south Tehran car park.

As we climbed the first flight of stairs, a dozen very young actors huddled along either side of the steps. Each held a candle or flashlight, looking petrified. Their faces were painted white with chalk and their mouths gaped. As if touched by a soft madness, each obsessively repeated a different gesture. One continuously slashed his arm with a knife, another murmured incessantly, while a third waved a brush in the air as if she were painting an invisible canvas. Others, who emerged from offices on the landing, counted out strings of numbers. Snippets of dialogue became audible: "It's warm out today. We're scared here. Spring is here. We don't know what awaits us tomorrow. It's summer. My father is dead. I would like to bury him."

The spectators traversed several floors, climbing up and down, looking at each other, trying to catch the gaze of one of the actors who disappeared into the crowd, listening to the performers' voices echo in the unusual space. Little by little, scenes emerged – on the roof, next to the elevator, in the hallways, on the steps, all while the director and an assistant guided the audience from one point to another around the building.

It was difficult to discern a dramatic arc to the piece, because of all the interaction between the spectators and the actors, and among the spectators themselves. There was talk of death, of dictatorship, of family violence in every corner. The atmosphere was gloomy, violent, morbid. The performers' movements were jerky, aggressive, convulsive, and there were screams and whispers, filled with terror and lunacy.

It all struck me as another example of the extent to which contemporary theatre in Iran expresses violence, its endless threat, and the repressive, suffocating effect on the nation's youth. The events that stage this condition provide spectators an opportunity to liberate themselves, if only fleetingly, from that imprisoning psychological force.

Beyond this emancipatory dimension, theatre in Iran provides the public a chance to reflect on the problems of society, from violence to political dysfunction. It is an ideal medium for a cultivated youth who, by and large, aren't seeking a revolution but rather an evolution of the system; who don't want so much to topple the regime as to understand the internal machinery, the codes, of a complex political and social order. Let us not forget that theatre is subsidised by the state and that theatre pieces, which aren't always censored, also serve a sclerotic system full of contradictions, one looking for ways to move beyond its impasses.

• The story was relaunched on 5 September 2013 to replace the photographs.