Youssef Elsamad was arrested at the scene and taken to Merrylands police station where he was charged with one count of murder on Saturday.

He did not appear in court, where he was refused bail, and is expected to appear in Parramatta District Court on January 31.

Mr Elsamad, who has worked as a labourer and tiler but is not currently employed, is believed to have known Mr Salihy, and police were told the pair met to sort out a grievance.

Police say that, about 10.01pm on Friday, Mr Salihy and a friend pulled up to 95-99 Eddy Street in Merrylands West where they met Mr Elsamad outside villa number 20.

The friend told police that Mr Salihy had told him "he had a problem with some guy that he wanted to sort out".

Mr Salihy asked Mr Elsamad to come and speak to him, to which Mr Elsamad allegedly replied, "I'm sick of this shit", before walking away to his residence.

He allegedly returned two minutes later with a shortened double barrel shotgun before firing one shot at Mr Salihy's upper chest, the friend told police.

Mr Salihy fell to the ground and died at the scene.

It is alleged that Mr Elsamad then fled towards his residence and, at 10.11pm, his sister made a call to police saying that someone was trying to break into their villa.

About 10.15pm police arrived and a PolAir helicopter flew over the housing complex. Mr Elsamad was seen in a backyard by those in the helicopter, before police on the ground arrested him.

He was in possession of a mobile phone and a cordless landline phone. He also had a "severe laceration to the top of his left ring finger that was bleeding profusely", police said. He told police this injury was a result of being shot.

Police allege that Mr Elsamad entered his residence and tried to flee over the fence of villa 21 to hide, by climbing a stack of chairs. A blood trail corresponding to this path was later found, police say.

Mr Elsamad has denied all allegations, and told police that an unknown person was responsible for the shooting and that he ran into the backyard because he thought he was being chased.

Mr Salihy's body was moved from the driveway where he fell. Police believe those who moved him were associated with Mr Elsamad, and that this was done to clear a path for vehicles.

Police have obtained CCTV footage from a villa that shows the driveway of the complex. They say that, about the time Mr Salihy's body was moved, a silver Toyota Camry entered and stopped around the vicinity of the shooting, before leaving three minutes later with its headlights switched off.

It is not known who was in this vehicle upon entering and leaving.