Kindly help me to choose between the following laptops. I'm a casual gamer, however main purpose is to run emulation softwares like gns3 and VMware (Price difference between these laptops is marginal.)
Being just 1.7GHz the i3 will struggle with what you are describing.
Consider the average Desktop i3 is between 3 and 3.5GHz -- and they aren't high tier performance, more middle of the range.
The i5 Laptop may have less RAM but this can easily be upgraded in the future, whereas upgrading the CPU is usually an expensive task.
Any particular reason you chose the "U" range processors? They are designed more for power saving than performance. You might find something with an i3-4000M or i3-4110M at a similar price. These run at 2.4/2.5GHz