निरंजन
Suppose I have the following directory structure for a project named foo. It currently looks as follows:

bash
.
├── bar
├── foo.dtx
└── foo.ins


What should I put in foo.ins to instruct it to \generate the README and .sty in bar/? Currently I have the following code in the foo.ins, but I am not able to find a way to \generate files at custom destinations.

### foo.dtx


% \iffalse
%<*driver>
\documentclass{l3doc}
\begin{document}
\DocInput{\jobname.dtx}
\PrintIndex
\end{document}
%</driver>
%<*package>
% Hello world
%    \begin{macrocode}
hello world
%    \end{macrocode}
%</package>
% \fi
\endinput


### foo.ins


\input l3docstrip
\usedir{tex/latex/\jobname}
\generate{%
\file{bar/\jobname.sty}{\from{\jobname.dtx}{package}}%
}
\endbatchfile


### build.lua


module     = "foo"

-- Documentation:
typesetfiles     = { "foo.ins" }

Skillmon
You can just use a path in \generate (though I don't think this is a good idea, mangling with paths is almost never a good idea in LaTeX).

---
File: foo.ins

\input l3docstrip
\usedir{tex/latex/\jobname}
\generate{%
\file{bar/\jobname.sty}{\from{\jobname.dtx}{package}}%
}
\nopreamble\nopostamble
\usedir{doc/latex/\jobname}
\generate{%

---