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psycopg2 needs to be compiled various development libraries. On Windows this is usually automated by using some version of Visual Studio — which is what the vcvarsall.bat file is all about — and is usually a huge pain. Fortunately, Jason Erickson maintains a Windows port of psycopg2 here.
I see now that you’re using Python 3.5, and there doesn’t seem to be a release for that version available on that page. Fortunately, there’s an answer for that already on Stack Overflow. (One of the comments says there’s not a version for Python 3.5 on the linked page, but that’s not true anymore)
Source:stackexchange.com