The husband of a woman battered to death on the streets of Lahore in the name of family "honour" said on Wednesday that her parents had fully agreed to their marriage, only later turning against him after he refused to give them more money.

Muhammad Iqbal's wife Farzana, 25, was killed in broad daylight outside Lahore's grand High Court complex after being attacked by a mob of around 20 male relatives, including her brothers and cousins.

Some reports said policemen watched the incident without intervening – all of the attackers managed to escape except her father, Muhammad Azeem, who had watched the entire attack and was arrested.

He told police that he wanted his daughter to be killed because "she had insulted all of our family by marrying a man without our consent" rather than another man, a cousin, who he had selected.

But her distraught husband, who witnessed the entire attack, said Azeem had supported the marriage for an engagement period that lasted almost two years, during which he was allowed to talk to Farzana regularly on the phone without actually meeting her.

The two men, both farmers from the same extended family who live in rural districts far from Lahore, had struck a deal whereby Iqbal paid Azeem £500 for the right to marry his daughter. But later he asked for another £600.

"The whole settlement had been agreed but then they got into trouble with their house expenses and they demanded more money," Iqbal told the Guardian. "Because I have more land than them, they think I am rich."

Rather than paying more, he and Farzana opted for a "court marriage", where she swore she was marrying of her own free will.

Her father responded by filing a complaint against Iqbal, who he accused of kidnapping her daughter.

Farzana had arrived early on Tuesday morning at Lahore's busy High Court to record a statement that would have quashed her father's complaint.

But 20 male relatives were waiting for her and launched a horrific attack on the busy street in front of the court, first trying to shoot her and then laying about her head with bricks from a nearby building site.

Even after she had died, her relatives continued to beat her face with their shoes, Iqbal said.

Although "honour killings" are known to take place in rural communities across Pakistan, such a brazen attack in the heart of one of Pakistan's most important and refined cities has horrified human rights activists.

"[Farzana's] murder was no case of sudden provocation, as several months had passed after her marriage," said Zohra Yusuf, chairperson of the Human Rights Commission of Pakistan (HRCP). "The family had obviously come prepared to commit murder."

In 2013 almost 900 women were killed by honour crimes, according the HRCP – although the real number is likely to be far higher, as most killings are never reported.

The state had failed to "confront this feudal practice supported by religiosity and bigotry", the commission said.

Conviction rates against honour crimes are pitiful because the killers are often allowed to walk free by Pakistan's Islamic-tinged legal system, which includes concepts that give the right of forgiveness to close relations of murder victims.

Tahira Abdullah, a human rights activist, said it was vital the country follow the civil code rather than Sharia law.

"This woman was pregnant so it is a double murder and these murderers must be prosecuted under the criminal laws of Pakistan," she said.

"We are now at a crossroads where we have to decide whether we continue going down the Talibanisation route or whether we go down the rule of law route."

Iqbal said his wife's killers would not escape justice as he was her next of kin and only he had the right to waive punishment.

"I will never forget the scene and I will never forgive them," he said.