Resolution:
Designer creates .TIBCO directory under C:\Document and Settings\&ltUser> in Windows and for Unix it is created under user home directory.

To change the location, you need to set java.property.user.home=&ltnewlocation> in designer.tra file and then start designer again and it will create .TIBCO directory in the specified location. Make sure that your location specified exists. Designer will not create the folders if it does not exist.
Instead it will create the .TIBCO under java.property.user.dir property location.