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Use folder structure not subdomains. This way you are creating one site with a lot of content, not many sites with a little content.

Keyword rankings for your homepage =  Yes. Because your homepage technically does not exist and is redirected to an inner page, which is focused on a particular city. So if your keyword is Bharat Desi, which is your website brand name, it shows: <cite>www.bharatdesi.com/</cite> Hyderabad Classifieds, Hyderabad Yellow Pages, Free Classifieds Hyderabad, India, Free Hyderabad Classifieds Online Classifieds Hyderabad, Free **...**And if your keyword is a regional keyword, like Houston Desi, then that page is not affected. In this case, this redirect is helping your Hyderabad page, because technically you are telling Google that hyderabad page is your homepage.Does that make sense ?