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In simple language, the term rent means a periodic payment made for the hiring or using any particular thing to its owner such as the rent of a building, rent of machine, etc. As this periodic payment may be either monthly, quarterly, or yearly is made according to the contract agreement agreed upon by the two parties, that is the owner and the tenant, such a rent is called as the contract rent or the gross rent.

In economics, the term rent is used in a special sense, here we speak of economic rent rather than contract rent.

Contract rent or contractual payment is called a periodical payment made by a tenant to the owner of a thing like building, furniture, etc. for its use and it includes interest on capital investment.

Economic rent, on other side, indicates only to the payment made for the use of land. It does not include interest on capital investment made by the landlord.

Contract rent is thus not true economic rent. True economic rent is only a payment for the use of land. It excludes interest on capital invested by the landlord.

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