I am trying to layout my xib so that layout fits in both iphone 5 (4 inches retina) and 3.5 devices.
Because I have to support IOS-5 I cannot use autolayout. I have
You need not use a different nib for the 3.5 inch and 4 inch devices. Design the app for the 4 inch device and set the AutoResizingMask correctly and it should work correctly.
In your case just set the AutoResizingMask to
[view setAutoresizingMask:UIViewAutoresizingFlexibleTopMargin|UIViewAutoresizingFlexibleHeight|UIViewAutoresizingFlexibleWidth];
The autoresizing mask places the view correctly to its position in both the devices.