Say annual rent in 1997 = A
=> Annual rent in 1998, B = A + x% of A = A + Ax/100 = A(1 + x/100)
=> Annual rent in 1999, C = B - y% of B = B - By/100 = B(1 - y/100) = A(1 + x/100)(1 - y/100)

We have to determine whether C is greater than A or not.
Let's assume C is greater than A.
=> C > A
=> A(1 + x/100)(1 - y/100) > A
=> (1 + x/100)(1 - y/100) > 1
=> (1 + x/100 - y/100 - xy/10000) > 1
=> (x/100 - y/100 - xy/10000) > 0
=> (x/100 - y/100) > xy/10000
=> (x - y) > xy/100

Thus only if (x - y) is greater than xy/100 then C will be greater than A.

Statement 1: x > y
This doesn't ensure the required condition.

Not sufficient.

Statement 2: xy/100 < (x - y)
This is exactly what we need!

Sufficient

The correct answer is B.