Activate .xsapp: Unsupported encoding Cp1252, only UTF-8 encoding is supported

Hi,

I'm new to HANA/XS. I'm trying to create a test Hana application. I have eclipse luna 4.4.1 installed. I have installed Hana plugin from https://tools.hana.ondemand.com/luna (screen shot below):

I have connected to a HANA system, created repository, packages etc. Basically all the necessary things to create a test HANA XS project.

But, when I create .xsapp and .xsaccess I get the following error whenever I try to activate those files:

Unsupported encoding Cp1252, only UTF-8 encoding is supported

Am I missing something? I tried finding similar error in the forum, but I was not successful. Kindly try to help me.

Thanks & Regards,

Lohit