Why is the source folder in the lib folder in eclipse gradle project?

When trying to create a gradle project in eclipse, the source folder, build.gradle and others are stored in a different folder called lib as a separate project. How can I make all the folders be within the project folder like in a normal java project?

The problem is that the New Gradle Project dialog invokes the Gradle init task with the hard-coded argument --type java-library and that the project layout for Gradle versions higher than 6.6.1 has a lib folder besides the main project folder for a project of the type java-library (in contrast to in Gradle 6.6.1 or lower and in contrast to a project of the type application independent of the Gradle version).

In the future, in the New Gradle Project dialog, the type application should also be chooseable, to get a simple project structure like in the past. But this is not implemented yet:
Eclipse Buildship issue #1118: Add more project templates to New Gradle Project wizard

As a workaround do the following:

1. In the New Gradle Project dialog on the second or third page, check Override workspace settings and
   • choose as Specific Gradle version the version 6.6.1 and
   • for Java home a Java 11 JDK
2. In the build.gradle change id 'java-library' to id 'application'
3. In Project > Properties: Gradle choose a higher Gradle version

The last two steps are only required to use a Gradle version higher than 6.6.1.