I think I narrowed down the issue to linux 4+ kernels. I installed systemd-1 from build while retaining 3.19 kernel, and it worked like a charm. I then updated to linux-4.0.5 and on reboot it went back to waiting to mount home and swap partitions. (While installing 4.0.5 kernel this time, I was carefully looking at pacman output but I didn't see any error messages). I then tried linux-next from build (kernel 4.1 released) but same issue of mounting home and swap partitions. I captured output of journalctl -xb after booting both 3.19 and 4.1 kernels. Following messages stood out during 4.1 boot time that didn't appear during 3.19 boot.
Jun 24 16:52:55 td-linux audit[260]: ANOM_ABEND auid=4294967295 uid=0 gid=0 ses=4294967295 pid=260 comm="systemd-udevd" exe="/usr/lib/systemd/systemd-udevd" sig=4
Jun 24 16:52:55 td-linux kernel: traps: systemd-udevd[260] trap invalid opcode ip:7f2ca1b95c1a sp:7ffc8860ee48 error:0 in libpthread-2.21.so[7f2ca1b8a000+18000]
Jun 24 16:52:55 td-linux kernel: audit: type=1701 audit(1435179175.916:2): auid=4294967295 uid=0 gid=0 ses=4294967295 pid=260 comm="systemd-udevd" exe="/usr/lib/systemd/systemd-udevd" sig=4
Jun 24 16:52:55 td-linux systemd-udevd[230]: worker [260] terminated by signal 4 (Illegal instruction)
Jun 24 16:52:55 td-linux kernel: microcode: CPU1 sig=0x306c3, pf=0x10, revision=0x17
Jun 24 16:52:55 td-linux kernel: microcode: CPU1 updated to revision 0x1c, date = 2014-07-03
Jun 24 16:52:55 td-linux systemd-udevd[230]: worker [260] failed while handling '/devices/pci0000:00/0000:00:1a.0/usb1/1-1/1-1.5/1-1.5:1.0'
Jun 24 16:52:55 td-linux kernel: microcode: CPU2 sig=0x306c3, pf=0x10, revision=0x17
Jun 24 16:52:55 td-linux kernel: microcode: CPU2 sig=0x306c3, pf=0x10, revision=0x17
Jun 24 16:52:55 td-linux kernel: microcode: CPU2 updated to revision 0x1c, date = 2014-07-03
Jun 24 16:52:55 td-linux kernel: microcode: CPU3 sig=0x306c3, pf=0x10, revision=0x17
Jun 24 16:52:55 td-linux kernel: microcode: CPU3 sig=0x306c3, pf=0x10, revision=0x17
Jun 24 16:52:55 td-linux kernel: traps: systemd-udevd[240] trap invalid opcode ip:7f2ca1b95c1a sp:7ffc8860eef8 error:0 in libpthread-2.21.so[7f2ca1b8a000+18000]
Jun 24 16:52:55 td-linux kernel: audit: type=1701 audit(1435179175.919:3): auid=4294967295 uid=0 gid=0 ses=4294967295 pid=240 comm="systemd-udevd" exe="/usr/lib/systemd/systemd-udevd" sig=4
Jun 24 16:52:55 td-linux kernel: microcode: CPU3 updated to revision 0x1c, date = 2014-07-03
Jun 24 16:52:55 td-linux kernel: traps: systemd-udevd[244] trap invalid opcode ip:7f2ca1b95c1a sp:7ffc8860ee48 error:0 in libpthread-2.21.so[7f2ca1b8a000+18000]
Jun 24 16:52:55 td-linux kernel: audit: type=1701 audit(1435179175.923:4): auid=4294967295 uid=0 gid=0 ses=4294967295 pid=244 comm="systemd-udevd" exe="/usr/lib/systemd/systemd-udevd" sig=4
Jun 24 16:52:55 td-linux audit[240]: ANOM_ABEND auid=4294967295 uid=0 gid=0 ses=4294967295 pid=240 comm="systemd-udevd" exe="/usr/lib/systemd/systemd-udevd" sig=4
Jun 24 16:52:55 td-linux audit[244]: ANOM_ABEND auid=4294967295 uid=0 gid=0 ses=4294967295 pid=244 comm="systemd-udevd" exe="/usr/lib/systemd/systemd-udevd" sig=4
Jun 24 16:52:55 td-linux kernel: microcode: CPU4 sig=0x306c3, pf=0x10, revision=0x17
Jun 24 16:52:55 td-linux kernel: traps: systemd-udevd[230] trap invalid opcode ip:7f2ca1b95c1a sp:7ffc88611078 error:0 in libpthread-2.21.so[7f2ca1b8a000+18000]
Jun 24 16:52:55 td-linux kernel: audit: type=1701 audit(1435179175.923:5): auid=4294967295 uid=0 gid=0 ses=4294967295 pid=230 comm="systemd-udevd" exe="/usr/lib/systemd/systemd-udevd" sig=4
Jun 24 16:52:55 td-linux audit[230]: ANOM_ABEND auid=4294967295 uid=0 gid=0 ses=4294967295 pid=230 comm="systemd-udevd" exe="/usr/lib/systemd/systemd-udevd" sig=4
Jun 24 16:52:55 td-linux systemd[1]: systemd-udevd.service: Main process exited, code=killed, status=4/ILL
Not sure if something got messed up on my installation that manifested on linux-4+ kernels or if this is a regression; but for now I am staying put on 3.19 kernel.
To the last user, @panky, who reported having same issue: Can you share what type system do you have and if you can replicate my findings.
Thanks