We are standing in the interconnecting tombs beneath Mohammed Ismail’s old house when he mentions the mummies – as one knew he would. The story of how the Abd el-Rassoul brothers discovered the cachette (everyone uses the French word) of bandaged pharaohs and flogged them off, confounding the authorities, is the defining narrative of this singular and roguish community: “They are clever, they not tell anybody they find,” says Mohammed, admiringly. “Forty mummies, necklaces, gold.”

Mohammed, a congenial gent in a grey djellaba and white headdress, and his neighbours are the last of a unique breed. They live in a village called Qurna, just a donkey dash from the Valley of the Kings in Egypt. Their houses are pharaonic tombs, and they once traded in stolen antiquities and were experts in the manufacture of fake treasures. Under cover of more legitimate touristic pursuits, some still cling to such practices, as I would discover.

The Egyptian government has wished them gone for a century or more, so it can excavate the archeology of the site. Now it has finally decided to put an end to their anachronistic way of life by destroying their bizarre habitat and frogmarching them into the 21st century. To some, the eviction is not before time – beautiful tombs and priceless treasures may be awaiting discovery. To others, the destruction of Qurna and its unique way of life is a tragedy. This is the story of the last of the tomb raiders, and it reaches surprisingly close to home.

By the time you read this, almost the entire village will have been razed to the ground by bulldozers and earth movers, and the villagers moved to an estate of brand-new bungalows four kilometres away on the edge of the Sahara desert, which has cost $20m to build.

Some of them are ready to leave their ancestral homes – one woman gives the thumbs-up sign and says that “inshallah” (if Allah wills it), in five days’ time her house will be flattened and she will be rehoused in “New” Qurna – but many are unhappy about the deal they have been offered. They say the new houses are not big enough for their families (Mohammed has to shoehorn nine people into his two-bedroom bungalow) and they claim their livelihoods, which are rooted here in alabaster workshops, cafes and guesthouses (not to mention antiquities, both fake and real), are being taken away. Those with most to lose – such as the memorably named Mohammed Snake, who runs a 12-room guesthouse and restaurant – are preparing to stay until they are physically removed.

These descendants of Bedouin nomads have lived in Qurna for hundreds of years. Their tomb houses have evolved by a principle known as bait hajr: “stone house” in Arabic. It is a template of civilisation itself: nomads use caves or tombs for shelter, eventually settle in one place, build permanent structures and form a community.

Picking our way through the rubble of smashed houses, we find a woman who is undergoing this civilising process in reverse. Being unmarried, 63-year-old Zeinab is not entitled to a house of her own. She emerges from a gash in the debris and leads us down into a compartmentalised hole. It is the tomb that was colonised by her ancestors and she has lived in it alone since the extended family home that stood above it was destroyed three weeks ago and 30 of her relatives were rehoused.

In the dark back chamber is a wickerwork divan covered in a rough blanket, an old wooden radio covered with a cloth, a photograph of her on the wall as a young woman in plaits. Oranges in a tin bowl seem to glow in the sepulchral gloom. “If you’re poor, [the government doesn’t] help,” she says. “Why? We don’t know why.”

A short clamber up the hill over piles of smashed mud bricks, Mohammed Ismail’s house has also gone. It was a two-storey dwelling with eight rooms for his nine family members. “When it fell down, it is like me falling down,” he says. His brother’s home, to which his was attached, is still standing. Feeling cramped and purposeless in his two-bedroom bungalow in “New” Qurna, Mohammed, who is 53, returns each day to his brother’s house and gazes on the rubble to which his birthplace has been reduced.

Running beneath both houses, the burial chambers are intact. The first ones Mohammed shows us are small and unexceptional – the oblong cellar that served as his kitchen, the storeroom where he kept ducks. Now he pushes at an ancient wooden door with a wooden lock, flicks a light switch and takes a cursory look inside. He is about to close the door when I poke my nose through.

This is my Howard Carter moment. Where I had expected a broom cupboard, there is a passageway about 10 metres long and 3 metres high. The weight of history makes me feel momentarily giddy – this is a classic pharaonic tomb design of courtyard, transverse hall, passageway, chamber and niche.

The floor is littered with polystyrene packaging, a tea strainer, a broom head. The stucco, and any cartouches or paintings that would have been applied to it, disappeared long ago, leaving bare, jaggedly hewn limestone, blackened by fires and oil lamps. “My grandfather lived here,” says Mohammed. He indicates the back wall of the niche, which is hung with a flouncy pelmet of cobwebs. “I think maybe it is bricked up and there are more tombs behind.”

Pharaonic tombs, and the undreamt-of treasure they may contain behind false walls, are the key to this standoff between the people and the government. Qurna is situated on the west bank of the Nile in Upper Egypt, facing the tourist town of Luxor across the river. It is plum in the middle of the Theban Necropolis, so-called because the ancient city of Thebes, on the site of modern-day Luxor, buried its dead here – and did so with a flamboyance and ingenuity unmatched by any civilisation before or since.

At least 600 tombs on the site (others put the figure even higher) have never been explored, according to Dr Mansour Boreik, the general director of southern Upper Egypt for the Supreme Council of Antiquities (SCA). “Every one of these houses has a tomb underneath it,” Dr Boreik tells me. “It is one of the major archeological sites in the world.” This is the justification for the eviction of the Qurna villagers and the destruction of their houses. “We need to finish emptying the mountain of people, then we will put in place the masterplan for the site management,” Dr Boreik says. He talks of “modifying” and preserving about 60 houses (of about 2,500) “so you can see how they were living, how they were sleeping. How they did harmony by the tomb and the house”. There will be a walkway, a visitor centre, cafes.

A 25-year-old Belgian Egyptologist, Pierre Coussement, who has been visiting the village for eight years, is cynical about the motives. “For the government, archeology is a small thing, tourism is a big thing – and the people are nothing,” he tells me.

The widespread belief is that the people of Qurna are being removed as one would remove a thorn from one’s side. They are bandits who have made fools of the authorities for centuries, and now they are paying for it. Few in positions of authority are prepared to say any of this publicly – one man appeared terrified when I spoke to him – but somebody who can be said to know what he is talking about described the end of Qurna village as a “catastrophe”.

Nobody has been more successful at making monkeys of the powers that be than the Abd el-Rassouls. The story of the cachette, which brings a glint to Mohammed’s eye in the half-light of his old mausoleum house, has a Whisky Galore! air to it. In the 1870s, two Abd el-Rassoul brothers discovered a stash of mummies and other objects hidden at the bottom of a vertical shaft between Qurna and the temple of Queen Hatshepsut.

Mohammed offers to take us there. In the punishing midday heat, the braying of a donkey and the plaintive call of the muezzin are the only indications of life amid the rubble of the half-destroyed village. We cross a bleached valley, climb a rocky hillside and stop at the jagged lip of a smooth-sided shaft. It’s impossible to see the bottom without running the risk of overbalancing, but this hole – the famous cachette – is said to be 10 to 12 metres deep, with side chambers running off horizontally from its base. “Forty mummies here,” Mohammed repeats. “Gold.” He opens his arms and grins: “Everything.”

The Abd el-Rassouls managed to keep their find a secret for several years while cannily slow-releasing pieces onto the antiquities market. Among the mummies eventually rescued from the cachette in 1881 were the remains of some of ancient Egypt’s greatest rulers from the XIX dynasty (c1300BC to c1200BC): Ramses I, Ramses II and Seti I. Along with other artefacts, they had been removed from their tombs in the Valley of the Kings by priests about 3,000 years ago and hidden here – ironically so that they wouldn’t be stolen by tomb robbers.

Such a tale may seem to belong in the pages of H Rider Haggard, but tomb-robbing, the trafficking of stolen antiquities and the passing off of fakes remain hugely lucrative activities, involving individuals and syndicates all over the world, including Britain. Recently a pharaonic statue said to be 3,300 years old, for which Bolton council had paid £440,000, was found to be bogus, and a couple in their eighties were charged with conspiracy to defraud.

One theory is that the razing of Qurna may even lead to an upsurge in tomb-robbing, as villagers plunder the newly uncovered tombs and take what they can as a final act of defiance. The week before our visit, a German national was arrested at Luxor airport with a suitcase containing more than 100 pieces. “He was found with some objects from Qurna,” confirms Dr Boreik. “He didn’t say where from.” If convicted, the man faces a stiff jail sentence.

Mohammed bats away questions about illegal booty with a practised air. “If I find, I am rich now,” he says. So we go to the horse’s mouth – a member of the Abd el-Rassoul family. Mahmoud Abd el-Rassoul’s great-grandfather and great-great-uncle, Mohammed and Ahmed, were the two who found the cachette. His father, Hosain, was present as a 13-year-old when Howard Carter discovered the tomb of Tutankhamun.

Mahmoud, plump and expressionless, offers us sweet tea but precious little else, as he fiddles with a bag of medicines on the table in front of him. No, he has no stories about the cachette. No, his father never talked about the King Tut discovery. And no, the house near his that has just been knocked down, revealing a tomb with some intact inscriptions, did not belong to an Abd el-Rassoul family member (this is untrue).

Another villager is more forthcoming. After rather theatrically checking that the window shutters are properly closed (“The government man is very clever. He come and check in every house”), this man leaves the room, with its whitewashed ceiling and swishing fan, and reappears with bundles of newspapers. From these he produces scores of objects, from a medicine jar with a handle in the form of Anubis, the jackal-headed god of the dead, to shabtis (figurines left in the tombs to perform the bidding of the deceased). These are almost certainly fakes, but 19th-century ones: works of art in their own right, with asking prices to match (scores of US dollars). When we start to make our excuses and leave, the man says: “Also, I have a friend who has wooden things. Very old. I show you.”

In another house in the village, the man with the wooden things offers tea, then he leaves the room and returns with a black plastic bucket covered in an old purple cloth. Like a conjurer’s, his hand delves beneath the cloth to produce object after object, which he lays out on the green plastic tablecloth. He is emphatic that they are not fakes. His patter is good too. He claims a stone head with exquisitely wrought ears was found in the Asasif tombs between Qurna and Hatshepsut’s temple. It would cost me “1,000 US”. For a ram’s head that he says was found at the Ramesseum, the mortuary temple of Ramses II, he wants $800. The man brings more and more objects: a monkey figure with an enormous phallus and fragments of mummy shroud attached, from the tomb of Ay ($300); a limestone hippopotamus “from the time of Amenophis III” (c1300s). But his most precious piece – for today anyway – is a superb 50-centimetre-high wooden statue of Queen Hatshepsut, with her comical long beard. It can be mine for “2,000 American”.

And in case we are worried about getting the stuff out of the country, he has reassuring news. The authorities, he says, “only look for Egyptian people. Tourists no problem”. He offers the use of a magnifying glass. “All pharaonic,” he assures us. “You see if you are interested after tea.”

Ever since the tombs were built, the temptation their treasures have exerted over anyone with both access and opportunity has created kleptomaniacs of the best of us. Tomb-robbing started with the men who built and decorated the tombs – and therefore knew where the best stuff was. Hosain Abd el-Rassoul, the one present at the discovery of Tutankhamun’s tomb in 1922, recalled that Carter’s patron, Lord Carnarvon, “took a little something” for himself.

But the heyday of pharaonic filching was in the first half of the 19th century. Some 200 metres southeast of the village, across the tarmac road that carries endless tourist buses to the Valley of the Kings, stands the temple known as the Ramesseum. It contains the fallen red-granite colossus of Ramses II, which inspired Percy Bysshe Shelley’s sonnet Ozymandias (“Half sunk, a shattered visage lies…”). It also reflects Europe’s industrial-scale involvement in tomb-robbing and temple-stripping. Europe’s collectors and its beau monde had been avid for pharaonic exotica since Napoleon’s invasion of Egypt in 1798 had prised open the country and its astonishing ancient culture. White adventurers (Dr Boreik calls them “hunters”) went out to ancient Thebes in droves to supply the demand. The names of some of them are carved – with evident disdain for the cartouches they were effacing – on the stones of the Ramesseum. Prominent among them is “Belzoni 1816”, written vertically in capital letters. Giovanni Battista Belzoni, a former circus strongman known as “the Patagonian Samson”, shipped many antiquities from Egypt to London. These include the alabaster sarcophagus of Seti I (Seti’s mummified remains, removed from the sarcophagus and hidden in the cachette, would later find themselves in the safekeeping of the crafty Abd el-Rassoul brothers). Sir John Soane, the architect and collector, snapped up Seti’s sarcophagus in 1824 when the British Museum balked at Belzoni’s asking price of £2,000, and it still lies in the crypt of Soane’s house in Lincoln’s Inn Fields in London.

But Belzoni’s biggest prize was the bust of Ramses II – known as the “Younger Memnon”, weighing more than seven tons and standing 2.7 metres tall – which he retrieved from the Ramesseum in 1816, with the considerable help of the villagers of Qurna. It caused a sensation when it was first shown at the British Museum, and the “Egyptomania” it generated inspired Shelley, who never set foot in Egypt, to write Ozymandias.

Facilitated by the muscle power and local knowledge of the people of Qurna, Giovanni Belzoni made a killing, but he remained ungrateful to the villagers. He called them “the most unruly people in Egypt” and criticised them for being lazy and neglecting agriculture. “They would never take a spade in their hands, except when they go to dig for mummies,” he wrote, somehow overlooking his own motive for being there. Across nearly 200 years, Belzoni’s views on Qurna are echoed in some of the comments of Dr Boreik of the SCA. Our interview is conducted at the office of the Antiquities General Inspectorate near Qurna, with four of his colleagues sitting in silent, unsmiling attendance. At one point Dr Boreik, a dapper 46-year-old in jeans and a striped shirt, uses an adjective to describe the villagers that he hastily adds is not for publication. He accuses critics of the eviction of spreading disinformation, and says some villagers are trying to hoodwink the authorities by pretending to still live in Qurna, therefore having a right to a new house, when they actually live elsewhere. He also dismisses concerns about their livelihoods. “Think about New Qurna, then think about the poor place they are living with the snakes and the scorpions,” he says.

“The business they are doing with the tourists is a dirty business.” He means unhygienic. Perhaps he also means nefarious. He looks momentarily disgusted, at any rate.

In this land of legends and hiding places, it is sometimes hard to know what is true. But one thing is clear: in conserving a dead civilisation, Egypt has destroyed a living one. For 17 years, Sid Ahmet worked as a conservator in the Valley of the Kings, before the acetone used to clean and preserve the tomb inscriptions damaged his health. Now he makes skilled replicas of tomb objects. He also makes fakes. He shows us how, dipping a wooden priest figure in a solution of what he refers to as “ammonium” and “carbon sodium”, as well as tea, then turning it across the floor of the workshop till it is furred with dust.

Now comes ingredient X. He produces a black plastic bag and folds down the top to reveal what looks like a jumble of old nylon tights: mummy shrouds, which are still found on the mountain. He rubs the dusty figure vigorously with a piece of shroud. “This gives me the blood of the pharaoh,” he says. “It makes old.” As his fingers move he recites a line of poetry I remember from a classroom far away: “Look on my works, ye mighty, and despair!” Then he grins and shakes his head in mock disbelief: “It is a story from Ozymandias,” he says.