The narrator is confused because it its unclear why does he live in a shabby home.
<u>Explanation:</u>
The civilian that the author is talking about in the passage had been retired from the service of the Hussars at a very young age of thirty five. Even though he settled in a wretched and a little village, still the life style he had was extravagant.
It was not clear to the people living in the surroundings that why was he living in such a shabby place. At his home, champagne flowed like water and the officers of high post of the regiment used to come for dinner. Even after this, he always used to be dressed shabbily so it was very confusing for the people living in the surroundings.
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