I wanted to encrypt passwords stored in application properties files. I can see that Pulumi secrets gives us the option to pick the encrypted password from pulumi config file but not from application properties file. Do we have any alternative so that i can pick the pulumi secrets from application properties file instead of pulumi config yaml files?

This isn't a Pulumi area. You want an encryption library. You have full access to your language's normal repositories of libraries in a Pulumi program.