hive-site.xml doesn't override default properties

Question

I'm trying to override hive default properties by setting them in hive-site.xml but it's not taking any effect. Few things that might be helpful in debugging the problem:

1. Environment variables:

   HIVE_CONF_DIR=$HIVE_HOME/conf HADOOP_CLASSPATH=$HADOOP_CLASSPATH:$HIVE_HOME/conf:$HIVE_HOME/lib HIVE_AUX_JARS_PATH=$HIVE_HOME/lib

2. Permissions: I have given 777 permission to entire hive directory (I know it should be 733 and I'm not supposed to make it 777 but for testing's sake I did it)

3. Valid XML: I thought it could be invalid xml but xsl definition and tags are intact and valid. No issue in xml.

4. hive-env.sh is being read but can't say about hive-site.xml

Please comment if any other details are required.